Race is on to make the bucks go further
Economic reality and cautious sponsors mean teams are looking for success without the old excess
Sunday 17 March 2013
The Formula One circus swept into Melbourne this week with its customary all-singing, all-dancing panache, but beneath the glitzy veneer insiders admit that the going is getting tougher as the recession has begun to make itself felt even in this traditionally insular and insulated environment.
"In F1, we used to talk about motorhomes, driver and engineer salaries, and team principal salaries," McLaren's chief, Martin Whitmarsh, said recently. "In the Eighties, it was all about excess, and that was one of the allures. We were in the decades of excess, but we have to grow up and realise that there comes a point where that isn't attractive any more.
"We've got to be about efficiency, which means restricting resources. I know it's controversial, but certainly within our company we have downsized, we have reduced our carbon footprint. I also know there are a lot better-quality discussions going on about bang for buck.
"Instead of, 'We need three more wind tunnels and 100 more engineers', the discussion is now, 'That's what we've got, how are we going to get performance out of it?' It's about efficiency now. They're much healthier discussions."
Besides the global recession, changes in television broadcasting are also leaving their mark. There is a general acceptance that viewing figures will fall in the short term in the initial move away from national broadcasters to pay-per-view, until people accept the idea, and that is also impacting on the level of income in the paddock at a time when even the small teams spend upwards of $70 million (£46m) annually.
"Clearly you would hope that there would be an uplift in revenue from pay-per-view, but I think all teams now have a more complex business model than purely selling the live television audience," Whitmarsh said. "We have for some time had to work harder and harder.
"Advertising has become a more challenging worldwide marketplace. Of course we hope we get some more revenue from pay-per-view. But Formula One is a mass-audience sport and we inevitably have to maintain that. We've got to enhance our show, and look at all the other media platforms outside of television that are increasingly being used."
McLaren will lose title sponsors Vodafone at the end of the season, though rumour links an increased involvement with GlaxoSmithKline, for whom the team's methodology has been employed by the multi-national pharmaceutical company to realise dramatic cost savings.
Honeywell recently elected not to pursue a sponsorship option within the sport. And at Sauber, one of the traditionally impecunious and conservative teams who celebrate 20 years of survival in F1 this season, Alex Sauber suggests that while the money is out there, some companies are afraid to spend. "We speak with CEOs who are interested until their marketeers dissuade them. In some cases it seems that they are terrified of making a mistake, and that therefore doing nothing is a safer option. We are finding that people still believe F1 offers an unbeatable worldwide marketing platform but, as we have experienced in our mutual deal with Chelsea, these things can take a long time to put together and to pay off."
However, on the other side of the coin multinationals such as Emirates, Columbia Records and BlackBerry have made recent investments. The airline's is thought to be $125m (£83m) over the next five years.
"The financial crisis and the economic environment has a big impact," admitted Mercedes AMG F1's executive director, Toto Wolff. "If big corporations have to scale down their investment, marketing or sponsorship is probably the first thing that you're looking at. But I guess the sport is in good form and good health.
"It's cyclical, it's going to come back, maybe in a different form, maybe with different kind of partners. We have seen Coca-Cola coming into the sport; BlackBerry, obviously, with us, has been a very important milestone for the team.
"So I don't feel so depressed for the sponsorship market, but we have to be very careful. We have to look after all the teams and try to keep the sport healthy."
At Lotus, the team principal, Eric Boullier, said: "The world economic situation doesn't help because every company still look at their budget and how it is spent. The funny thing is that Formula One is attractive today to a lot of companies, and we actually have on our shirts signs of a couple of new sponsors, including Coca-Cola, Microsoft and Unilever, which are big companies looking at new strategies. Formula One is the only global sport in the world."
One of the most significant new investments is that of Swiss watch-maker Rolex, believed to be pumping in $10m (£6.6m) a year in a deal with Bernie Ecclestone's FOM company.
"We recognize Formula One as the pinnacle of motorsport and, as the leading luxury watchmaking brand, we felt the global appeal, brand fit and nature of the partnership opportunity," said Arnaud Boetsch, Rolex's director of communication and image. "No one factor influenced us, but more a combination of global appeal and shared values such as innovation, precision and the very highest quality. Rolex are comfortable investing for the long term when the opportunity is right."
Cost-consciousness remains the watchword. Red Bull spent between $296m (£196m) and $344m (£228m) in 2012, compared to Ferrari and McLaren's $240m (£160m), Mercedes's $225m (£150m) and Lotus's $190m (£125m), all well below the $350m-450m (£230m-£300m) Toyota were rumoured to have spent each year in their fruitless pursuit of F1 glory between 2002 and 2009.
Rain forces drivers off
In an unexpected twist to Melbourne's recent record run of heatwave days, Formula One became a victim of the weather before qualifying in Albert Park yesterday.
A downpour before the start of Q1 rendered the first session a lottery in which Lewis Hamilton, Mark Webber, Paul Di Resta and Felipe Massa all had off-road adventures as Nico Rosberg set the pace for Mercedes from Ferrari's Fernando Alonso and Lotus's Romain Grosjean.
The slowest six drivers were eliminated, so out went Pastor Maldonado, Esteban Gutierrez, Jules Bianchi, British rookie Max Chilton and Caterham drivers Giedo van der Garde and Charles Pic. After further delays, another deterioration in the weather eventually prompted postponement of qualifying until 11am Melbourne time (1am this morning in the UK). The last time that happened was in Japan, in 2010 and 2004.
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