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Alex Hint WILL GOOGLE BUY FORMULA1? PART 1

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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

TRANSCRIPT

Page 1: Will Google Buy Formula 1. PART 1

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

PDF

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 2: Will Google Buy Formula 1. PART 1

Feel free to download PART 1 of the book ldquoWill Google

Buy Formula 1rdquo in the following formats

PDF

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 3: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 4: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 5: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 6: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 7: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 8: Will Google Buy Formula 1. PART 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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 9: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 10: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 11: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 12: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 13: Will Google Buy Formula 1. PART 1

(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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 14: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 15: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 16: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 17: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 18: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 19: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 20: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 21: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 22: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 23: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 24: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 25: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 26: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 27: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 28: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 29: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 30: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 31: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 32: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 33: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 34: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 35: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 36: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 37: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 38: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 39: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 40: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 41: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 42: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 43: Will Google Buy Formula 1. PART 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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 44: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 45: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 46: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 47: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G

Page 48: Will Google Buy Formula 1. PART 1

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

Twitter

Facebook

Google+

Best wishes always

Alex

S H A R I N G