F1's unending financial woes; or "It's the income, stupid."

[MOWOG]

Arguably the best thread currently active on this forum! =D>

[GitanesBlondes]

And people wonder why ratings are down?

The ratings are down for the exact same reason they were down in 2004 – dominance of one team and driver.

I know far more people who stopped watching in 2013 because of the tires.

[wesley123]

And people wonder why ratings are down?

The ratings are down for the exact same reason they were down in 2004 – dominance of one team and driver.

I just have to ask, not only to you, but also Gitanes, what are these ratings based off?

Dominance is hardly ever a problem, it never really has been. In reality, the sport has seen dominance in most of it's years. Before Red Bull, it has been Ferrari, and before that Williams and McLaren were the ones, also Lotus has seen some dominant years and so did Brabham iic.

Dominance is part of the sport, any sport and imo it is hardly a source to lesser ratings or viewers. At least, it is not for me.

[beelsebob]

And people wonder why ratings are down?

The ratings are down for the exact same reason they were down in 2004 – dominance of one team and driver.

I just have to ask, not only to you, but also Gitanes, what are these ratings based off?

Dominance is hardly ever a problem, it never really has been. In reality, the sport has seen dominance in most of it's years.

And in most of its years has had a rather small viewership. The short term periods of lowest viewership relative to the era have tended to match up exactly with one driver, or team becoming significantly dominant. I also disagree that the sport has seen dominance on it's current level commonly in the past. We've only seen the same driver and team combination win four championships on the trot twice before in the entire history of the sport, and one of those was prior to TV coverage, the other one matches up with the other huge drop in TV viewership.

Before Red Bull, it has been Ferrari

Correct, and correlated with a huge drop in viewership while schumacher won everything.

and before that Williams

Williams only dominated for about 3 years, and at all times, Ferrari were in contact with them sufficiently to take championships down to the wire. Not only that, but a different driver was contesting the championship each time.

and McLaren

McLaren never really dominated the sport for several years on the trot. They had a few disparate years in which they had an exceptionally good car, but they did not have any series of more than a couple of years where their car could wipe the floor with everyone.

were the ones, also Lotus has seen some dominant years and so did Brabham iic.

But both prior to significant TV viewership.

Dominance is part of the sport, any sport and imo it is hardly a source to lesser ratings or viewers. At least, it is not for me.

Of course not for you – you're a hard core F1 fan, you're watching it for different reasons to the majority. The majority are looking for the hope that their driver comes first. When that's extinguished with 5 races still to run, 4 years running, they're not going to watch any more. Lack of competition has been repeatedly correlated with lack of viewership in other sports as well.

[Moxie]

And people wonder why ratings are down?

The ratings are down for the exact same reason they were down in 2004 – dominance of one team and driver.

It is worse than that. Just to put numbers on the F1 death spiral.

Over the last three seasons there have been 174 podium opportunities. 75% of the time, the podium is occupied by one of four teams:

Red Bull 37%
Ferrari 19%
McLaren 18%
Renault/Lotus 15%

In 2011 there were 8 of the 12 teams never reached the podium 66%
2012 5 12 41%
2013 7 11 56%
For an average of 57% of teams do not reach the podium in a season.


Now if any of you were a in charge of the advertizing budget of a very large corporation...Why on earth would you ever consider blowing tens if not hundreds of millions of dollars on HRT , Caterham, or Marussia? The only time we see these cars on TV is when they are being passed by the leaders...not much there for a sponsor to use to develop a positive image of the brand.

Frankly, it is getting pretty boring, like watching a funeral procession.

MrE's solution...focus on driver drama...give them permanent numbers. Create drama by forcing teams to use tires that only last 5 or 6 laps. Hey lets make the last race or few races worth double points.

The real solution...GET BACK TO RACING...where individual teams do not have special privileges, and teams throughout the ranks have a real chance to win prize money.

[Mysticf1]

Television based marketing isn't the dominant force it once was, younger generations are watching much less TV and so called "new media" marketing is growing fast. Maybe the lack of sponsorship is simply the market telling F1 they don't represent good value for money, no matter what Infinity likes to say. Are teams valuing car space too high?

[MOWOG]

Television based marketing isn't the dominant force it once was, younger generations are watching much less TV and so called "new media" marketing is growing fast.

Surely this is something any 83 year old understands! Perhaps having someone in charge of.... well, everything.... who came of age during the interval between WWI and WWII is not such a great idea? Crikey, Luca D is ancient and he could be Bernie's son.

Are teams valuing car space too high?

Red Bull certainly is.

[Pup]

For all intents and purposes F1 is "owned" and "run" by Ecclestone.

True

But, making the races tighter is not the answer...we've already been moving in that direction, and the result has been worst racing ever seen at any point in F1's history. The world does not need another spec series race, and it being seen as being better for F1 is illogical.

The fan in me agrees 100%. I try to watch NASCAR and most all I can see is a bunch of artificial contrivances designed to bunch up the pack. Not all, but most all. But to play devil's advocate, an advertiser surely sees a very different picture. When they look at a photo like the one below, they see a lot of big billboards each of which gets a ton of airtime, whether they're leading the race or two laps down.



Again, I hope that's not the answer, but surely it's at least a part of the problem.

I would say though that there are ways to bunch up the pack without resorting to contrivances. I said above that I wasn't turned off by everything NASCAR - one of the things that appeals to me is the basic aerodynamics of the cars (very little), which encourages close racing unlike F1.

McLaren as no title sponsor for the first time since Bruce McLaren was alive if I'm not mistaken.

Let's hope that isn't the case, though it's looking more and more likely.

[Pup]

Are teams valuing car space too high?

It's a good question. Ideally, the price of the sponsorships would sort themselves out in the market and the teams would then adjust their budgets to match. And ideally, all the sponsorship deals would be fairly equal. Of course we know the second part isn't true, and I wonder if that fact doesn't lead some teams to forgo signing smaller sponsor deals just because they feel it will permanently relegate them to the midpack, or worse.

What I mean is that if you know that Red Bull is getting say $75 million for their title sponsorship, but the offer on the table is a five-year deal at $25 million, then if you take that deal you're probably going to be a midpack team for the next five years, barring a miracle. So you might walk away from that deal hoping for something better.

The problem, as you suggest, might be that there is nothing better. The value of the sponsorship really is $25 million, it's just that Mateschitz has more money than he knows what to do with and is overpaying. Or maybe it's that Red Bull, because of other tie ins, really are getting $75 million in value while very few other companies would.

[rich1701]

Phillip Morris has an interesting view on marketing in F1. They ended their partnership with Mclaren in the mid 90s because they had no star drivers at the time. They insisted on Mansell being in the car for 95 even though he was arguably past it. In 96 they demanded a reduction in their support but Ron Dennis wouldn't have any of it and found a sponsor who would pay Mclaren's desired market value. The stature of a driver for some sponsors is a key factor in sponsorship value. Phillip Morris's continued involvement with Ferrari does intrigue me still. I'm surprised that Ferrari's subliminal "logo" is still worth so much to Phillip Morris, over time surely it's value will be diminished. I guess they have realised f1 isn't really attracting a new demographic of viewers, that is viewership is relatively static with long term fans who already have the association with Marlboro in formula 1.

[Pup]

FOM doesn't need to subsidize smaller teams, but for crying out loud, FOM does need to give the small teams a chance to win something. Even though they are at the rear of the grid, those teams still spend a fortune just to place a car on the back row. That is a lot of money to spend for nothing. That is a lot of money to for which to beg from sponsors, with damned little hope of winning prize money.

This might be a good argument for customer teams. Not only would they be more competitive for less money, but the FIA could then hold a 'customer championship' alongside the constructors. That would give the customer teams a separate shot at prize money and perhaps more exposure.

[Pup]

Here's an interesting tidbit from TJ13 today on the entry fees for the teams...

Cost of playing the F1 game

The cost of entering F1 is much larger than it used to be. There is a $500,000 flat fee and a charge of $6,000 per point which the team scored in the previous year.

This leaves Red Bull racing with an entry fee payable this month to the FIA of $4,076,000. Cash strapped Lotus will have to find $2.39m, whilst one benefit to McLaren from arguably their worst ever year in F1 is their 2014 entrance fee is a mere $1.232m.

In fact, Jean and his cronies in the Place de Concorde will receive some $11,800,000 from the teams entrance fees as a contribution towards their annual fine wine and snails expenses.

[Pup]

Phillip Morris has an interesting view on marketing in F1. They ended their partnership with Mclaren in the mid 90s because they had no star drivers at the time. They insisted on Mansell being in the car for 95 even though he was arguably past it. In 96 they demanded a reduction in their support but Ron Dennis wouldn't have any of it and found a sponsor who would pay Mclaren's desired market value. The stature of a driver for some sponsors is a key factor in sponsorship value. Phillip Morris's continued involvement with Ferrari does intrigue me still. I'm surprised that Ferrari's subliminal "logo" is still worth so much to Phillip Morris, over time surely it's value will be diminished. I guess they have realised f1 isn't really attracting a new demographic of viewers, that is viewership is relatively static with long term fans who already have the association with Marlboro in formula 1.

The Ferrari/Philip Morris relationship is a mystery to me as well. At the time, there was a rumor that Ferrari was essentially selling the entire livery of the car to PM, who in turn sold off space to other sponsors - becoming an agent of sorts for the team. I don't know if there was any truth to that or not.

Otherwise, I have a hard time seeing where they're getting the value from their sponsorship. Though apparently they are.

[wesley123]

I'm surprised that Ferrari's subliminal "logo" is still worth so much to Phillip Morris, over time surely it's value will be diminished. I guess they have realised f1 isn't really attracting a new demographic of viewers, that is viewership is relatively static with long term fans who already have the association with Marlboro in formula 1.

In fact, as time moves on it's subliminal message increases.

SF's logo is pretty much half of Marlboro's logo, and with the teams past with each other it does a perfect job in relating SF to Marlboro.

Brands are created and grow into normal society by a long time branding and relation to other products, you aren't getting this relation with a 5 year sponsorship. No, it's going to take a long time and success to make that logo a part of common society, and that is something Phillip Morris understands very well.

[GitanesBlondes]

Longevity of brands long after they step down as a title sponsor is nothing new.

Consider that John Player tobacco last sponsored a F1 car at Adelaide 1986 - over 27 years ago.

Yet, the image of the John Player Special livery on the Team Lotus cars is ingrained in the mind of every single die-hard F1 fan/long-time F1 fan. Drivers and brands can become inextricably linked to one another long after the driver has last driven. When you bring up the cars that Ayrton Senna drove, the two that pretty much come to mind for everyone is the JPS Lotus and the Marlboro McLaren. I suppose one could consider the job the tobacco companies did with F1 liveries to be successful beyond anyone's wildest imagination as everyone remembers those liveries far more than they do a present livery.

It's at work in NASCAR to use the best example of exposure in motorsport. I cannot think of the Lowe's home improvement store without thinking of Jimmie Johnson and the #48 Chevrolet. The opposite holds true - if I see Jimmie Johnson, I immediately think of his Lowe's sponsored #48 Chevrolet.

NASCAR does an incredible job of exposing sponsors to the public, which is something F1 has not done well in a very, very long time.

Of course NASCAR also has relevant sponsors that the average fan can have a use for. What relevancy do the majority of F1 sponsors have these days? None. They are companies/products in many cases aimed for the nouveau rich...you know the small segment of people who F1/Ecclestone seem to focus the most on, instead of the average fan that is far greater than the 1%.

The other thing I remember about the JPS Lotus cars beyond the JPS branding, was the DeLonghi and Olympus Cameras sponsorships. Williams I will always remember for the Canon, Camel, and Labatts sponsorship. McLaren, Marlboro, Boss, and Shell.

F1 can't attract sponsors because the exposure is terrible for what the asking price is to buy in as a title sponsor. The title sponsor buy in is high because of how expensive it has become to run a team these days. The only companies willing to sponsor are those with products aimed at attracting millions of dollars. No offense to say Petronas, PDVSA, or Santander, but why would I give one iota of a --- about them? There's nothing they have or sell that I would want. Lesser companies while interested in marketing are not going to pay the outrageous sums F1 requires for minimal exposure. The ROI is not even worth it.