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Will Google Buy Formula 1?: How the Partnership of Two Leaders Would Make the World a Better Place by Alex Hint In this book, I expressed ideas that could help: • Retain existing fans of the sport - Make Formula One even more accessible to the fans - Make Formula One even more interesting for the fans - Offer the opportunity to follow the sport through today’s Internet capabilities, which is especially attractive for the youth • Attract new fans to the sport • Strengthen the sport’s position in the global business arena • Strengthen the financial backbone of all involved • Activate dormant resources to serve society You can download PART 1 of the book for free: PDF http://goo.gl/ORsyWS mobi http://goo.gl/3dIZ6p epub http://goo.gl/zR8Jft __ Alex Hint is the author of Will Google Buy Formula 1. Follow Alex Hint on g+: http://goo.gl/HmeCLV
Citation preview
Alex Hint
WILL
GOOGLE BUY
FORMULA1
PART 1
Feel free to download PART 1 of the book ldquoWill Google
Buy Formula 1rdquo in the following formats
moby
epub
S H A R I N G
PART 1 of th e b ook
WILL GOOGLE BUY FORMULA 1
by Alex Hint
Copyright
Translated by Anna Rasshivkina
annarasshivkinagmailcom
Co-author Kelly Norman
kkellynormangmailcom
Copyright copy 2013 by Alex Hint
alexhintsgmailcom
All rights reserved
No part of this book may be reproduced or transmitted in any form or by any means electronic or mechanical including
photocopy recording or any information storage and retrieval system without permission in writing from the publisher
Please do not participate in or encourage piracy of copyrighted materials in violation of the authorrsquos rights Purchase only
authorized editions
Will Google buy Formula One
Wait is Google really buying Formula One
What would this give Google
What on the other hand would it give Formula One
And finally what would it give us the Formula One devoteesmdashall of those who with unbroken
interest have followed the Championships year after year
And for that matter what would it give those who arenrsquot interested in Formula One at all (Wow hard
to believe that such people exist)
Thatrsquos what this book is about
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Feel free to download PART 1 of the book ldquoWill Google
Buy Formula 1rdquo in the following formats
moby
epub
S H A R I N G
PART 1 of th e b ook
WILL GOOGLE BUY FORMULA 1
by Alex Hint
Copyright
Translated by Anna Rasshivkina
annarasshivkinagmailcom
Co-author Kelly Norman
kkellynormangmailcom
Copyright copy 2013 by Alex Hint
alexhintsgmailcom
All rights reserved
No part of this book may be reproduced or transmitted in any form or by any means electronic or mechanical including
photocopy recording or any information storage and retrieval system without permission in writing from the publisher
Please do not participate in or encourage piracy of copyrighted materials in violation of the authorrsquos rights Purchase only
authorized editions
Will Google buy Formula One
Wait is Google really buying Formula One
What would this give Google
What on the other hand would it give Formula One
And finally what would it give us the Formula One devoteesmdashall of those who with unbroken
interest have followed the Championships year after year
And for that matter what would it give those who arenrsquot interested in Formula One at all (Wow hard
to believe that such people exist)
Thatrsquos what this book is about
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
PART 1 of th e b ook
WILL GOOGLE BUY FORMULA 1
by Alex Hint
Copyright
Translated by Anna Rasshivkina
annarasshivkinagmailcom
Co-author Kelly Norman
kkellynormangmailcom
Copyright copy 2013 by Alex Hint
alexhintsgmailcom
All rights reserved
No part of this book may be reproduced or transmitted in any form or by any means electronic or mechanical including
photocopy recording or any information storage and retrieval system without permission in writing from the publisher
Please do not participate in or encourage piracy of copyrighted materials in violation of the authorrsquos rights Purchase only
authorized editions
Will Google buy Formula One
Wait is Google really buying Formula One
What would this give Google
What on the other hand would it give Formula One
And finally what would it give us the Formula One devoteesmdashall of those who with unbroken
interest have followed the Championships year after year
And for that matter what would it give those who arenrsquot interested in Formula One at all (Wow hard
to believe that such people exist)
Thatrsquos what this book is about
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Copyright
Translated by Anna Rasshivkina
annarasshivkinagmailcom
Co-author Kelly Norman
kkellynormangmailcom
Copyright copy 2013 by Alex Hint
alexhintsgmailcom
All rights reserved
No part of this book may be reproduced or transmitted in any form or by any means electronic or mechanical including
photocopy recording or any information storage and retrieval system without permission in writing from the publisher
Please do not participate in or encourage piracy of copyrighted materials in violation of the authorrsquos rights Purchase only
authorized editions
Will Google buy Formula One
Wait is Google really buying Formula One
What would this give Google
What on the other hand would it give Formula One
And finally what would it give us the Formula One devoteesmdashall of those who with unbroken
interest have followed the Championships year after year
And for that matter what would it give those who arenrsquot interested in Formula One at all (Wow hard
to believe that such people exist)
Thatrsquos what this book is about
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Will Google buy Formula One
Wait is Google really buying Formula One
What would this give Google
What on the other hand would it give Formula One
And finally what would it give us the Formula One devoteesmdashall of those who with unbroken
interest have followed the Championships year after year
And for that matter what would it give those who arenrsquot interested in Formula One at all (Wow hard
to believe that such people exist)
Thatrsquos what this book is about
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
CONTENTS
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Preface
PART 1 THE PROBLEMS
1 SHOW A Shrinking TV Audience Or For Whom the Bell Tolls
2 SPORT Pay Drivers Are They the Best of the Best
3 BUSINESS You Say You Want to Be a Millionaire Become a Billionaire Then Buy a Formula One
Team
4 BUSINESS Money into the Wind
5 BUSINESS A Global Sport and Its Earnings
6 The Winning Formula A 3-in-1
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
PART 2 THE SOLUTIONS
1 Money From the Wind Toward the Good of Mankind
2 A Hopeful Course in the 2014 Regulations
3 To Patent or Not to Patent That is the Question
4 Our Main Heroes and the Formula of a Partnership
5 Formula One in the USA
6 A ldquoBig Bangrdquo on the Little Planet a Formula for Generating Money for Formula One (In Numbers)
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
7 Upside Down Or Is It the Other Way Around A Formula for Success for the Race Tracks
8 Formula One at a Crossroads Which Path Will It Choose
9 The Formula One Fan of Tomorrow
10 The Formula One of Tomorrow
11 Without a Suit
12 Will Google Accept This Challenge
AFTERWORD
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
To the FIA Formula One World Championship and Google Inc
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Preface
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Formula One means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
Google means
bullHigh speeds
bullFirst-rate engineers
bullCutting-edge technology
bullA leader in its field
bullEnormous popularity
How would the partnership of these two leaders
change the world for the better
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
(Note The last lines of this book were set down with the flick of the chequered flag of the final race of the 2013
season)
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
PART 1 THE PROBLEMS
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
One out of fourteen people in the world watch Formula One Whatrsquos
Formula One We know itrsquos a 3-in-1 show sport and business This synergy is what makes Formula
One incredibly interesting attracting an audience of millions from all corners of the world Thatrsquos why
Formula One became a world-class sport and earned the honorific ldquoThe Queen of Motorsportrdquo
But itrsquos not just sunshine and roses in this kingdommdashthere are a few systemic problems and
negative tendencies Letrsquos try to sort through these issues and attempt to devise some solutions that
would not only make Formula One more interesting but also give it a fresh impetus for growthmdashand
on top of that could make Formula One useful for people all over the world regardless of whether
theyrsquore Formula One fans or not
Itrsquos always been true that ldquoThose who seek will findrdquo After all the gold mine is right beneath
our feet We only need to add a few lines to the existing algorithm fix a couple of bugs and our
Formula will delight us with how perfect its results become
To find those bugs we first need to concentrate not on what the program doesnrsquot do but on
what it does 1 So this is exactly how wersquoll start our stroll through the code of Formula One And if we
manage to correct those bugs then the financial well-being and longevity of our ldquoQueenrdquo will stop
being cause for concern and wersquoll be free to simply admire her beauty and magnificence with a light
heart
1 Mehran Sahami seestanfordedu Introduction to Computer Science | Programming Methodology CS 106A Handout 6 ldquoUsing
Karel with Eclipserdquo Sep 26 2007 httpseestanfordedumaterialsicspmcs106a06-karel-in-eclipsepdf
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
While reading this book you will probably notice that the narrative style includes elements
of humor and irony That is no accident I wanted our discussion instead of turning boring and
tedious to stay light and informal The simple and vivid analogies will help us communicate ideas
more clearly and view the situation from a unique angle Nevertheless you can easily grasp all the
gravity and complexity of the questions wersquoll be raising
So letrsquos explore each of the elements of Formula One one by one
SHOW SPORT BUSINESS
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
1 SHOW A Sh rin k in g T V Aud ien ce
O r For W h om th e Bel l Tol ls
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
1 SHOW A Shrinking TV Audience
Or For Whom the Bell Tolls
A fan an audience this is the foundation the base of the base of Formula One If there are no fans
there is no Formula One This is an axiommdashjust like ldquoWithout an audience there is no theatrerdquo
Without fans Formula One couldnrsquot earn a penny Only with a global audience numbering in the
hundreds of millions can billions of dollars be made These means provide the opportunity to use
cutting-edge technology conduct costly research and attract the worldrsquos best drivers and engineers
But as we all know in the past few years the share of free-to-air (FTA) TV channels
broadcasting Formula One has decreased while the share of premium channels has increased What
does this mean On the one hand Formula One earns more revenue from broadcast rights
accordingly the teams get higher prize payouts from Bernie Ecclestonersquos Formula One Management
(FOM) So it would seem that the teams should be sighing with relief But in reality things arenrsquot that
simple
The teamsrsquo budgets arenrsquot based just on FOMrsquos prize money A substantial part of them
consists of sponsorship money And the bigger the audience the more money the sponsors pay In the
move to premium channels the audience is shrinking which means that sponsorship rates will
inevitably go down So it turns out that only the owners of the sport benefit
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
But they arenrsquot the ones who create the showmdashthe teams are And in this situation the fanmdashbecause of
and for whom all of this existsmdashloses the most and possesses the fewest rights 2
Now lets look at Formula Onersquos prospects considering the current trend of switching to pay TV and
consequently the shrinking audience
A business whose foundation whose basis of existence (for Formula One none other than
its fans) is being squeezed risks ruin with no hope of return How often have you seen a successful
business with negative growth dynamics Basically this is the road to nowhere Sooner or later the
business will simply cease to exist and its remains will be sold under the hammer for a pittance In this
situation alarm bells should be ringing and one should be taking urgent measures to turn things
around
Do you remember the famous line of John Donnersquos ldquoNever send to know for whom the bell
tollsmdashit tolls for theerdquo We live our lives under the illusion that this will never happen to usmdashanyone at
all just not to us And truly it is useless to ask for whom the bell tollsmdashwhat is useful is to remember
this and to act while act we still can
Take a look at Yahoo which used to be a giant in the IT industry in the old days Thanks to
incredible efforts it managed to stop its downfall And now Marissa Mayer is trying to steer it towards
a revival But if the company had failed to hear ldquothe tolling bellrdquo in time itrsquos possible that by now Yahoo
would be nothing but a Wikipedia page
2 Allen jamesallenonf1com ldquoFrance follows UK and Italy to pay TV model for F1 coveragerdquo 2013 Feb14
httpwwwjamesallenonf1com201302france-follows-uk-and-italy-to-pay-tv-model-for-f1-coverage
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
So whatrsquos going on in our kingdom Only rarely do the team leaders or a few others involved with
Formula One express concern The loudest voice on these matters is Ferrarirsquos president Luca di
Montezemolo He deeply understands the necessity of change and of new approaches geared towards
retaining the existing audience and attracting new fans especially among the youth 3
Hersquos repeatedly spoken out about Formula Onersquos problems He is a person who is vitally interested in
the sports success But even he with all of his authority and love for the sport has not been able to
markedly change the situation
We can agree or disagree with some of his views but therersquos one thing I know for sure our
main goal is the same We all want the show to go on we all want the sport to flourish we all want
Formula One to interest as many people as possible to be as accessible as possible both in terms of
watching it on TV and in terms of going to the Grand Prix
Itrsquos possible that in order to shatter the deadlock the sport needs more of our support the support of
500 million fansmdashthose because of whom the show exists And then those on whose shoulders the
future of Formula One rests will no longer be able to ignore the chorus of voices of such an enormous
audience
3 Andrew Benson BBC SPORT Formula 1 ldquoBernie Ecclestone era close to ending says Luca Di Montezemolordquo Dec 21 2012
httpwwwbbccouksport0formula120809314
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
The alarming facts speak for themselves In 2008 the TV audience numbered around 600 million
people in 2012 it was only 502 million 4 And this is in spite of the fact that the 2012 season was
recognized not only as the most interesting of the past five years but also as one of the most
interesting in the entire history of Formula One 5 And if a small fluctuation in the number of viewers
wouldnrsquot call for concern then such a steep decline sets one to some serious thinking And as it should
be the mind lets us see what our eyes cannot
That is what future awaits our sport if every five years Formula One continues to lose 100 million of its
viewers Thatrsquos right by 2040 the sport will simply cease to exist But do we really want this to be
Formula Onersquos fate
4 ESPN Staff ESPN F1 ldquoF1 TV audiences fall in 2012rdquo Feb 17 2013
httpenespnf1comf1motorsportstory100893html
5 Keith Collantine F1FANATIC ldquo2012 rated the best season of the last five yearsrdquo Dec3 2012
httpwwwf1fanaticcouk201212032012-rate-race
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
To prevent this outcome we must all become allies regardless of our status whether we are a fan a
team or an investor And none of us must forget that without fans Formula One wouldnrsquot earn a cent
The show cannot go on without its fans
And yeshellipldquoThe show must go onrdquo
TASK 1
Turn the decline in audience around
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
2 SPORT Pay Drivers
A re T h ey th e Bes t of th e Bes t
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
We all love Formula One We love it for its breathtaking wheel-to-wheel battle for its
beautiful overtakings for its unexpected tactical moves We cheer on a certain driver or team Some
eagerly follow the carsrsquo technical evolution the move of drivers and engineers from one team to
another the appearance of new faces in the pit lane Each new person brings fresh ideas and original
approachesmdashand who knows maybe hersquos the one who will become the new Ayrton Senna or Adrian
Newey
Behind the scenes of Formula One there lies a different universemdashone where severe
passions boil Ah how they boil No wonder Formula One is occasionally called ldquoThe Piranha Clubrdquo
This is a place where remarkable plots are woven This is a place where dreams come true and hopes
crumble And all of this is madly fascinating and captivating They are all elements of the showmdasheach
one is just a tiny brick in the skyscraper we call the FIA Formula One World Championship
We all have our own interests and preferences Still above all for all of us Formula One is a
sport And a sport in turn is primarily what happens on the track The central players here are the
drivers These are the men who evince the efforts of the entire team hundreds of exceptional
professionals incredibly devoted to their work
Each member of a team gives to his work not only his knowledge and skill but also a piece
of his soul a piece of his being Qualified as they are they could easily find work close to home and
spend every evening with family Only a truly committed person with a genuine love of his work is
ready to bear the separation from family the perpetual moving and the cold comfort of hotel rooms
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
We donrsquot know the names of the ordinary employees An interview with one of them
appears only rarely When it does wersquore offered a glimpse of the enthusiasm with which they talk about
their work or the unique and difficult tasks they face every day or the way they ended up with Formula
One Some of them strove for many years to get this job while others got there by virtue of chancemdash
each had his own unique path But a manrsquos fate stands behind each of these stories
We learn about nearly every comment made by a driver or a team principalmdashthe media
seizes every word and promptly spreads it around the globe But the stories of ordinary ldquoFormulersrdquo
(letrsquos use this name for the employees of a Formula One team) are often no less interesting They open
up the curtains and we learn whatrsquos happening behind ldquoThe Queen of Motorsportrdquorsquos glossy exterior
Behind those curtains we find the hard work of hundreds of specialists in every field They donrsquot have
salaries with a lot of zeroes they donrsquot get awarded trophies and they donrsquot have international fame
yet they are still there And day in day out they do their best to streamline the processes to refine
each detailmdasheven the most minor onesmdashall to give the driver of their team the best competitive car
possible
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
And in the end itrsquos the driver who gives expression to the possibility and potential invested in every car
by all of these people This is why the level of the driverrsquos skill mastery and experience is immensely
importantmdashhersquos on the very cutting edge So itrsquos the sensible desire of every team to have the best
drivers in their ranks
At least thatrsquos the ideal But do things actually work that way
In a recent interview Flavio Briatore spoke about the fact that only a few teams pay their drivers The
rest invite ldquopay driversrdquo who fund their own seats in the cockpit As he suggested this arrangement
probably doesnrsquot help the very best drivers to make it to Formula One 6
Flavio has always been unusually able to do away with the chaff and describe the bottom
line in just a few strict words Over the past two decades Flavio played a prominent role in Formula
One Under his command teams were awarded World Constructorsrsquo Championships and drivers
became World Driversrsquo Champions Far from all Formula One teamsrsquo directors can claim similar
achievements in their own portfolios I think many will agree with me when I say that the paddock lost
something when he left Flavio Briatore is an extraordinary person and his success outside of Formula
One only confirms this
6 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
But letrsquos get back to the drivers Well is Formula One currently a venue where only the very best
perform I donrsquot think many people would answer this question affirmatively But at the same time we
all perfectly understand that this isnrsquot happening because of the teamsrsquo greed In a nutshell for them
this is a question of life or deathmdashtheir future participation in the Championships is at stake They are
forced to act this way
So it turns out that something is awry in our kingdom And if something is going wrong
that means we need to do something about it But the time to act is now before itrsquos too late
TASK 2
Adjust Formula Onersquos business model in a way that lets the starting grid represent
the very best drivers
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
3 BUSINESS You Say You Wa n t to Be a
M il l ion a ire Becom e a Bi l l ion a ire
T h en Buy a Form ula O n e Tea m
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Some of you may have heard people say something like ldquoDo you want to become a millionaire
Become a billionaire and buy a Formula One teamrdquo This business has always been a risky one But
unlike past times if you decide to take up business in Formula One today your odds of success are
approaching zero 7
Maintaining a Formula One team is a pleasure that doesnrsquot come cheap and at this point
only a few teams turn a profit So you wonrsquot find a long line of people wishing to join the ranks of the
lucky ones involved in the sport
Whatrsquos more no one was even willing to take up the baton of HRT the now defunct team
whose assets were sold for a pittance And that was already an established team Maybe not a large one
maybe not one that managed to achieve anything extraordinary but it was a platform to move forward
frommdashwhich in any case is simpler and cheaper than starting from scratch They went to ruin even
though they had Pedro de la Rosa an experienced driver who had brought with him the knowledge
and skill of years of racing including as a member of a large and successful team But alas after three
racing years HRT is nothing but history In early 2013 rumors were circulating that a group of
Canadian and US investors were ready to buy the team but talks stopped there8 And therersquos nothing to
insure other teams against a similar fate
7 Paul Weaver theguardiancom ldquoSeven F1 teams face crisis over looming bill for extra pound132bnrdquo May 24 2013
httpwwwtheguardiancomsport2013may24f1-teams-crisis-bill-costs
8 GMM Journalist Scorpion team could rise from HRTs ashes Jan 30 2013
httpwwwmotorsportcomf1newsscorpion-team-could-rise-from-hrt-s-ashes
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Remember how Peter Sauber had to take emergency measures to save his stake after BMW announced
its retirement from the sport And now right before our eyes the team with a twenty-year history has
entered trying times once again Peter Sauber the founder of the team beloved by many is once again
forced to fight for its future
Or you could look at Force India which is fairly successful from a sports point of view One
canrsquot help but feel that we enjoy its performances only because of the team leader Vijay Mallyarsquos
exceptional enthusiasm
And herersquos another example Lotus a team that for two years has consistently succeeded in placing or
even taking first place It would seem that they at least shouldnrsquot have any problems But even thatrsquos
not the case
Each teamrsquos situation is different but nobody is immune to the threat of financial insolvencymdashit hangs
over all of them like the sword of Damocles
Only a handful of teams leading the standings feel relatively safe But even the McLaren team which
took third place in 2012 finished the year with financial losses 9
9 Adam Cooper msnfoxsportscom ldquoMcLaren F1 Team Sustained Financial Loss In 2012rdquo Oct 2 2013
httpmsnfoxsportscomspeedformula-1mclaren-f1-team-sustained-financial-loss-in-2012
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
The way things are going can we be sure that the show can go on for years to come How long will the
travelling circus be able to keep traveling if almost its entire band falls ill and most of their horses
canrsquot leave the stables
Letrsquos go back to the notorious 2005 USA Grand Prix when only six cars competed Yes that was
another kind of problem But what difference does it make for the fans why most of the teams didnrsquot
make it to the starting gridmdashwhether it was because of tire problems or money problems Whatrsquos
important is that the crowd in effect was deceived People paid considerable money to enjoy a show
with many buying their tickets months ahead of time and planning their vacations around it Then
they languished in trembling anticipation counting down every day to the start of the race But what
did they see
It was like if Lewis Hamilton and Nicole Scherzinger went to a concertmdashletrsquos say Metallicamdash
and James Hatfield the lead singer wasnrsquot on stagemdashand nobody was on stage except Lars Ulrich the
drummer Of course Lars could put on an amazing show all on his own but Nicole being a singer
probably wouldnrsquot be completely satisfied with a concert like that Or if Fernando Alonso and his
friends decided to support their favorite soccer team FC Barcelona They showed up at the stadium
and out of all of FC Barcelona on the field were just the goalkeeper a couple defenders and Lionel
Messi playing offense Fernando looked at the other half of the field the same picture I bet Fernando
Lewis and Nicole could smile at this scenario if they saw it in a comic book but definitely not in real
life
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
What Irsquom getting at is this how many Formula One fans will remain if only four teams can participate
in the races
Most of the teams are experiencing serious financial trouble To be confident in their future Formula
Onersquos business model needs to be changed
TASK 3
Adjust Formula Onersquos business model so that all of its parties can have solid financial foundations
and confidence in tomorrow
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
3 BUSINESS Mon ey in to th e W in d
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Formula Onersquos revenue and its distribution are trade secrets But in our connected times itrsquos relatively
difficult to keep the cat in the bagmdashsome things still get leaked to the press and thanks to the
Internet they become available to anyone whorsquos interested Working from this data wersquoll continue our
conversation about Formula Onersquos commercial positionmdashin other words about Formula Onersquos
financial behavior in the global economy
The teamsrsquo budgets have varied throughout the years In pre-crisis times the total budget of all of the
teams spilled past $3 billion 10 Now the teams have had to tighten their beltsmdashbut in any case they
spend a pretty substantial amount every year Now letrsquos take up this question what do they spend that
money on
Flavio Briatore offered a very simple and concise answer the teams spend colossal amounts
of money ldquochanneling the air up and down and this and that [sic]rdquo 11
Luca di Montezemolo has also repeatedly emphasized that aerodynamics is ldquotoo importantrdquo
in present-day Formula One Itrsquos hard to disagree with him Why does Ferrari invest in technology that
can be used in space but in no way in the automotive industry 12
10 Christian Sylt amp Caroline Reid Motorsport-totalcom ldquoTeambudgets um zehn Prozent ruumlcklaumlufigrdquo Feb15 2010
httpwwwmotorsport-totalcomf1news201002Teambudgets_um_zehn_Prozent_ruecklaeufig_10021506html
11 Maurice Hamilton Autosportcom laquoInterview Flavio Briatore uncutraquo Apr 27 2013
httpplusautosportcompremiumfeature5284interview-flavio-briatore-uncut
12 SCUDERIA FERRARI RACING NEWS ferraricom laquoMontezemolo laquoCongratulations to the winnersraquo Dec 20 2012
httpwwwferraricomenglishformula1newsheadlinesPages121220-montezemolo-congratulations-to-the-winnersaspx
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Now letrsquos remember what the word ldquowindrdquo means In a nutshell itrsquos the flow of air the movement of
air Wind thatrsquos what Formula One is spending billions of dollars on But when it comes to the matter
of serious business the wind is far from the place where entrepreneurs want to invest their money
Money should make money
not wind up in the wind
Thatrsquos why manufacturers who by all appearances should be competing for the right to participate in
Formula Onemdashwhere they could research and try out new technological ideas for their main
businessesmdasharenrsquot really striving toward this Itrsquos because the vast majority of developments in
Formula One canrsquot be applied in production cars
This is one of the basic problems of modern-day Formula One and it leads to other ones
Think of Porsche for example who preferred to return to the ldquo24 Hours of Le Mansrdquo race instead of
participating in Formula One A serious business isnrsquot ready to throw money ldquoto the windrdquo A serious
business wants to invest in technology And if Formula One was to create those conditions the
reaction wouldnrsquot take long it wonrsquot just be car manufacturers lining up before the elite clubrsquos gates
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
TASK 4
Adjust Formula Onersquos business model so that it becomes a platform for developing and testing ideas
that are applicable beyond Formula One
and not only in the automotive industry
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
3 BUSINESS A G lob a l Sport
and Its Earning s
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Formula One positions itself as a global sport and this is true in a lot of ways Throughout a season
the World Championship travels across countries and continentsmdashtherersquos a reason the Queen of
Motorsport is also called the Travelling Circus Over its 64-year history representatives of dozens of
nations have appeared on the starting grid and the Grand Prix itself has been held in dozens of
countries the map of hosting countries is constantly growing Not long ago a few more countries
joined the elite club Formula One returned to the USA and the debut of a Grand Prix Russia is at
hand Therersquos a list of nations expressing their desire to host either their first or a returning national
Grand Prix Formula One has a television audience covering nearly two hundred countries
This is all true This great work done by Bernie Ecclestone calls for a lot of respect Now is a
great time to fit in a story about this remarkable person whorsquos devoted over forty years of his life to
Formula One But over these years which have been so inextricably tied to Formula One so many
things have happened in Berniersquos life that to tell about them within the confines of a single chapter
would be an absolutely hopeless undertaking But itrsquos no secret that in a lot of ways itrsquos thanks to his
efforts that we can enjoy this sport todaymdashthanks to him that Formula One has taken on its current
shape and scope and whatrsquos more important gained potential that far exceeds todayrsquos borders We
must admit the result is well worth it So letrsquos toast to Berniersquos health and longevity so that he may see
a new turn in Formula Onersquos developmentmdashthe sport that hersquos devoted himself to for all these years
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
So Formula One has come a long way over these 63 years and itrsquos got some things to show for itself
But the fact that Formula Onersquos worldwide broadcasting revenue is comparable to that from
broadcasting soccerrsquos Turkish Football Premier League should give us some serious pause 13
Now I have complete respect for any national championship of any sport and Irsquom well aware that
soccer is much more popular than Formula One is in Turkeymdashafter all thatrsquos the main reason the
calendar is missing a Turkey Grand Prix But Turkeyrsquos soccer championships can hardly be called
globalmdashtheyrsquore not world championships and their popularity certainly doesnrsquot span two hundred
countries
Again the English Premier League earns more just from their UK broadcasting rights than
Formula One does from all of its income sources 14
Or herersquos another example Major League Baseball earns five times more than the Formula One World
Championships 15
And when yoursquore comparing the World Championship with a National League then you
canrsquot help but feel that the sport show and business on an international level not only can but indeed
must earn much more
13 Andrew Benson BBC SPORT Formula1 ldquoPay as you go go go F1s pay drivers explainedrdquo Jan 27 2013
httpwwwbbccouksport0formula121194933
14 Andrew Benson BBC SPORT Formula 1 ldquoFormula 1 teams are in survival mode says Whitmarshrdquo Feb 15 2013
httpwwwbbccouksport0formula121463651
15 Matt Snyder Cbssportscom ldquoReport MLB revenues in 2012 were $75 billionrdquo Dec 9 2012
httpwwwcbssportscommlbeye-on-baseball21335810report-mlb-revenues-in-2012-were-75-billion
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Thereby a reasonable question arises does Formula Onersquos income correspond to its status of a global
show sport and business
Now letrsquos evaluate Formula Onersquos place in a financial arena of well-know global companies To do this
letrsquos look at the following data on some of these companiesrsquo net profits in 2011 (in billions of dollars) 16
(Irsquoll put down approximate figures which are enough for a general picture of the current situation)
16 Elzio Barreto Reuters ldquoUPDATE 1-F1 revenues to grow near double digits till 2016 UBSrdquo May 30 2012
httpwwwreuterscomarticle20120530formulaone-ipo-idUSL4E8GU36L20120530
Company Net Profits (in billions)
Formula One $05
Ford $200
General Motors $90
Apple $260
Microsoft $230
Google $100
Wal-Mart $155
Coca-Cola $85
McDonaldrsquos $55
Proctor amp Gamble $120
Walt Disney $50
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
In using these numbers as an example Irsquom not trying to say that Formula One is a tiny and
insubstantial drop in a giant ocean of financial sharks I only want to bring some very simple questions
to light
bullIs Formula One squeezing out all 100 of its potential Like say the best drivers do from their cars
bullCan Formula One step into the business ring as a ldquoheavyweightrdquo
without getting boxed around the ears
bullWhat steps does Formula One need to take to grow into a significant and solid financial empire
TASK 5
Adjust Formula Onersquos business model to increase its profitability to a level that fits its status not only as
a global sport and show
but also as a global business
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
6 The Winning Formula A 3 - in -1
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
In the paddock itrsquos often said that for victory everything needs to fall into place all of the pieces must
come together Itrsquos a good sign if a team has the best driversmdashthat suggests they could realize the carrsquos
maximum potential Itrsquos a good sign if a team has the best constructors toomdashthat theoretically
suggests theyrsquoll have the best car And itrsquos a good sign when the weekend goes by without a hitch and
the team can tune the car to the best setup There are number of other factors too which in turn could
be divided into a great deal of elementsmdashand in each of them the team needs to achieve the best
possible result But even this doesnrsquot guarantee victory because another team could have achieved even
better results All this is true for any Formula One team But itrsquos equally true for Formula One as a
whole the future of the Big Circus can only be successful if all of the elements come together if all
three components of Formula Onemdashsport show and businessmdash
are at their height
Speaking of the sportrsquos components letrsquos pause and consider two things the driversrsquo and the teamsrsquo
competitiveness on the track
We could argue for a long time over the driverrsquos role todaymdashabout how much of the racersquos
outcome depends on himmdashand we could try to figure out percentages for the driverrsquos influence vs the
carrsquos But whatrsquos the point of that I think a lot of people are more worried about who makes their way
to the starting grid do the best and the worthiest have a seat here I have no doubt that any driver who
gets the chance to make a debut at the Grand Prix is talented and well-prepared to participate in the
races each driver proved this in the feeder series Besides the Super License isnrsquot given to just anybody
and no team would put an amateur behind the wheel But Formula One is the pinnacle of motorsport
and this means that only the best should have a place here
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Despite this we all know that in the struggle for a race seat the one who wins often isnrsquot the one who
outperforms the others but the one with more sponsorship money Does the sport benefit from this I
doubt it Itrsquod be interesting to know whether a match with Brazilrsquos national soccer team would draw a
lot of fans if the field wasnrsquot filled with the best players but with those whorsquod managed to find more
sponsors Itrsquos hard to even imagine a situation like that there But we have a special kind of kingdom
and here reality can take the most unlikely forms
So it turns out that a money shortage has our teams gripped in its financial jaws and itrsquos depriving
them of the chance to put on the starting grid only those who it was created and meant for the very
best drivers
But all of this is only one side of the sports component After all we all perfectly understand why many
teams are forced against their wishes to choose in favor of the driver with a more impressive
sponsorship portfolio the team needs the money simply to exist And the money to put it very lightly
is no chump change
Not to mention the purpose of any team isnrsquot to simply participate in the races itrsquos to be
competitive in the battlesmdashthat is to be a true contender and have a chance of fighting for the highest
standings And to do that they need a competitive car above all else But a car like that wonrsquot appear
with the wave of a magic wandmdashagain it costs money to engineer it17
17 Sarah Holt Sportukmsncom ldquoHow much do Formula 1 cars costrdquo Aug 09 2013
httpsportukmsncomf1how-much-do-formula-1-cars-cost
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Itrsquos no secret that if you were to place the stars of Formula OnemdashFernando Alonso Lewis Hamilton
Sebastian Vettel Kimi Raikkonenmdashthe World Champions the leaders of their teamsmdashbehind the
wheel of a Caterham or a Marussia itrsquos unlikely theyrsquod be able to compete with even novice drivers at
the wheel of a Red Bull Ferrari or Lotus Even the mastery of a World Champion would fall short at
beating such odds
So it turns out that a lack of money strangles most teamsrsquo best intentions they can neither afford to
invite the best drivers nor to build the most competitive cars
What it comes to is this the sport side of things very strongly depends on how the financial
side of things is going And if Formula Onersquos business model gave most teams the opportunity to make
money and to gain independence from the amount of money their drivers can bring in then both the
teams and the cars would be more competitive and they could invite the best drivers without looking
through their pockets And as we know the greater and tighter the competition the more gripping the
spectacle is for the fans
So it turns out Formula Onersquos business model could use some improvement
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
For the sport to not only remain popular but to grow and flourish we need to improve all of its three
areas And itrsquos necessary to work on them constantly just as the teams do every day they try to
improve their carsmdasheven in the tiniest and at first glance most inconsequential details
Standing in place isnrsquot a luxury Formula One can afford if it rests on the laurels of todayrsquos success and
indulges in self-admiration it wonrsquot have long to wait before crisis hits Of course from time to time
one needs to stop and if necessary even take a step backmdashbut only to look around and re-evaluate
which direction will lead to growth and success
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
And neither in our fast-moving sport nor in our fast-paced times is there any room for mistakeshellip
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G
Thank You
Thank you for reading PART 1 of Will Google Buy Formula 1
You may download the whole book from
Amazon
Kobo
Feel free to give your honest feedback and share your opinions
Google+
Best wishes always
Alex
S H A R I N G