xpensive wrote:Pissing away the commercial rights to a Giga-bucks money-machine like F1 for a measly 3 MUSD per annum, to an old business-ally?
Totally outrageous to xpress it mildly.
This comment shows
A. Total lack of understanding business risks and finance
B. An emotional bias which makes it unlikely that we will ever get a solid critical comment from the author.
The income from F1 was never meant to be 100% income to the FiA. The business was created by Bernie with substantial share holding of the teams. The FiA had a very small traditional income from their own property. Before Bernie created the business the race promoters were the biggest money makers in F1 racing.
Bernie created the idea to sell the TV rights including the advertising trackside and he got the race promoters to pay him, the FiA and the teams to pay race fees. He also started the paddock business of corporate hospitality which he used to run through a straw man for many years.
So by the time when complaints were made to the EU competition authorities about the dual role of the FiA as governing body and holder of commercial interests in F1 there was the situation that Bernie had created the business, knew all the secrete data of performance and was controlling the business by his special relationship with the teams.
Interested parties in buying the business from the FiA would have a very difficult job to create a strategy to bid against him. There were many uncertainties. How would F1 extract themselves from Europe and expand to a global sport? How much money would the teams get out of the commercial rights holder long term if it was an outsider who did not know the ropes? How would the fees and paddock business develop depending of the competition for future grands prix? How would TV revenues and cost shape up in the age of digital TV.
It turned out that nobody contemplated the risk of running that business against the established entrepreneur which isn't too surprising. Most people who tried to do it with Bernie's support actually failed. Does someone remember the Hoffa brothers and Leo Kirch?
As it stood in 2001 (which was around the time when this went down) $ 330 mil was a lot of money and including the interest for 99 years it looked a lot bigger.
People who criticize the deal with hindsight always compare what Bernie managed to squeeze out of the business in the following years. They forget that nobody else would have had the means and the ruthlessness to make that much money. Bernie ripped them all off. The teams eventually managed to substantially increase their share of the fortune but the poor fans really were taken to the cleaners. Bernie opened the grands prix to many countries in Asia and Arabia which had traditionally never been competitors and pushed the sanctioning fees to unprecedented levels. A ticket which should be thirty or perhaps fifty bucks was now going up to 150 and 200. Tax payers were poring in hundreds of millions that were never expected to swell the profits of FOM, but Bernie got away with it. Nobody but Bernie could have pulled all these stunts because the man simply controlled the teams which had always been the strategic strength the business was based on.
Those people who argue with todays enormous FOM profits conveniently forget that nobody but Bernie would have been able to generate them in the first place. Who else but Bernie would have managed to avoid spitting F1 eventually in the summer of 2009? Who else but Bernie (and the teams in his back pocket) would shamelessly rob every other stake holder of the last penny and get away with it? NOBODY.
