Tag Archives: Money

Pit Stop – Tough time at the bottom – By Lewis Brearley

It’s a tough time for Formula One’s smaller teams at the moment. Financial worries are causing ructions within all but the largest teams and disappointingly no action seems to be in the pipeline.

Force India replaced Paul di Resta with Sergio Perez this week and with it gained an estimated $10 million from his Mexican backers and sponsors.

Many fans decried the fact that a very talented driver had lost out to a guy with a fat wallet. Yet this is harsh on Perez, a man who gave a world champion, Jenson Button, a decent challenge in a tricky car.

Indeed it’s arguable that Perez and di Resta are on the same level, unlikely to be world champions but capable of winning races when given the machinery. It’s not Force India’s fault that they need all the money they can get and it’s certainly not Force India’s fault that no other team has picked him up.

However, this deal is yet another sign that Formula One’s financial model needs to change. Another driver who is supported by a large amount of corporate money and another good driver destined to spend the rest of his career in sportscar racing, IndyCar or the DTM.

The answer is simple but it will be a complicated political process to implement it. The owners of Formula One, a private equity named CVC Capital Partners. With over $46 billion in investments and no passion for motor sport, their number one priority is squeezing profit out of Formula One and they do this very successfully.

For example in 2012 Formula One revenues were estimated at around $1.5 billion and CVC took a colossal $865 million from that. From the remaining revenues, the FIA takes a small percentage and then the teams take their share, decided by the all-important Constructors’ Championship standings.

Hidden within this share is a hugely unfair element however. Recently the teams signed up to a new payment structure which gives bonuses to teams who have won championships in recent years – Ferrari, McLaren, Red Bull – and also Mercedes thanks to an agreement between Bernie Ecclestone and the team that kept them in the sport.

So unfair is this structure that Ferrari could score zero points in next year’s championship and still receive more money than if Lotus managed to win the championship.

Why sign up to the thing then, you may ask? Well, it was forced upon them after Red Bull and Ferrari first signed it. Rumours swirled that the remaining teams had no other option than to sign up or else face watching a Ferrari Formula One World Championship sponsored by Red Bull with two constructors providing customer cars to the smaller teams.

Thanks to this unequal agreement and a bizarre lack of interest from sponsors, most teams are now struggling to stay afloat with soaring costs and declining revenues combining to crush their accounts.

If only there was a spare $800 million that could be shared between the grid. However, CVC will not give up this money easily. Aware of the financial difficulties they have an alternative answer: have five ‘constructors’ and five ‘customers’ which would sharply reduce costs for the smaller teams and allow CVC to keep even more of the revenues for themselves.

This isn’t an acceptable answer. It would reduce Formula One to a shadow of the fair, engineering battle that it is supposed to be and if one big team quit, the customer would be taken down with it.

The true answer as CVC are unlikely to be moved aside, is a budget cap. For this to happen Red Bull and Ferrari would have to accept that the good of the sport should be prioritised over the good of their teams.

Whether this will happen will be the background story throughout the 2014 season.

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Pit Stop – Sauber Roubles – By Lewis Brearley

This week saw the good news that the Sauber team had secured their future for the long-term.

The Swiss team had been in worrying financial difficulties, which during the past month became so serious that lead driver Nico Hulkenberg went unpaid and promptly announced he would be leaving for safer shores at the end of the season.

Major investment will come from a troika of Russian companies and involves partnerships in which Sauber will help promote Formula One in Russia and develop high-technology engineering solutions.

While deeper information is as of now unavailable, the deal is believed to be so substantial that several other F1 teams were known to be chasing it.

Not only will Sauber benefit from a large injection of funds, but also from the advanced knowledge of top scientists and engineers at the National Institute of Aviation Technologies.

As part of the deal, Sauber is expected to be contracted to give Sergey Sirotkin – a talented Russian driver – an F1 seat next year.

Currently running fifth in the championship standings of the Formula Renault 3.5 World Series, Sirotkin is Russia’s most exciting prospect in the sport. However at the tender age of 17 and with this being only his second year in a respected development series, worries are that he is being rushed into F1 ahead of time.

The Russian’s are eager to build up awareness of the first ever Russian Grand Prix in 2014, and believe that a competitive home driver is an integral part of a country’s interest.

However Sirotkin isn’t even contending for the FR3.5 title and it would be much more sensible for him to remain in the development series for a couple more years. This would allow him to step up to F1 as a more complete driver when he ready.

From this approach the Russians appear to be prioritising the financial success of their Grand Prix over the career of a huge talent. For 2014 the viewing figures may be higher, but for a country who doesn’t have much of an F1 fanbase – even casual ones – a talented driver would bring greater long-term advantages.

The growth of F1 in Spain is a perfect example of the success of this approach. Before Fernando Alonso arrived Spain had minimal interest in F1 and MotoGP dominated the motor-racing news. Alonso was managed carefully and nurtured through the lower levels, before being given a plum seat when he was ready for it at the Renault team with which he would win his two world championships.

F1 now has a huge following in Spain and Alonso is a sporting icon in his homeland on the same level as the top La Liga footballers and Rafa Nadal.

The most important thing that the Russians should learn from the Alonso-effect is that business in sport should always be symbiotic with a long-term, patient vision.

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Cue Action – Tour Changes – By Will Vallely

World snooker chairman Barry Hearn has announced major changes to the snooker tour that will come into effect next season.

Next season will see twelve ranking events in the calendar, with five set to take place in China and one in India. The tour will also see the players return to Australia for a revamped Australian Open.

However the main change to the tour is that in nine of the top 16 players in the world will no longer have a large advantage over everyone else by entering the events later on. All players will have to start in the very first round of events.

The world championship for now will remain seeded which will guarantee the top 16 players taking part. The Masters will also keep its format with just the top 16 being invited to the event.

This change has divided many players opinions, some players believe that they have earned their place to be considered elite players and that the fans want to see the best players at the end of events but others claiming if you cannot beat the lower ranked players then you don’t deserve to be at the latter stages of events.

One of the most outspoken players on the tour Mark Allen has criticised the decision to have so many events in china, his main concern is the cost of travelling to the events: “There are just so many outlays, especially if we’re going to China six or seven times a year. The expenses have probably tripled or quadrupled since Barry took over, when we started going to China we used to get our flights paid for but when Barry came in he stopped that, so that’s probably another £10,000-£15,000 a year we have to pay out.”

Also this week, qualifiers for the upcoming world championship have been taking place. Young Belgian sensation Luca Brecel will not be at the crucible this year, the UK Championship quarter finalist lost 10-6 to Scottish amateur Fraser Patrick in the first round of qualifiers.

There are a number of older but familiar faces who still have a chance to qualify Jimmy White, Joe Swail, Alan Mcmanus and Tony Drago are all still in contention to make the event.

Also six time world champion Steve Davis will have to beat 2002 champion Peter Ebdon if he wants to appear at the crucible. However he still has to win one more match to set up the tie.

This year’s World Championship takes place at the Crucible Theatre in Sheffield between April 20 – May 6

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Attendances v Ticket Prices – By Jack Maleham

Are attendances in the Football League dwindling due to an increase in ticket prices? According to research from the BBC, the average cost of the cheapest adult season ticket across the top four divisions has risen by 11.7% over the last 12 months.

So then, has this price increase affected attendances in the Football League? Well if you look at certain clubs within the Championship, League One and League Two it certainly looks that way.

An example of this is Derby County. In the 2011/12 season Derby’s average attendance stood at 26,020 in the Championship. Then for the first time in seven years they increased the prices of season tickets by 10%, and now for the 2012/13 season their average attendance has dropped to just 22,194.

This suggests that some supporters have been put off by the 10% increase and have decided not to purchase season tickets this season.

Even though Britain remains in difficult financial times, football clubs are still charging fans high prices.

“Despite the difficult economic times we live in, prices at some clubs and at some levels of the game are still exceedingly high,” Malcolm Clarke, chairman of the Football Supporters’ Federation, said.

Of the 72 Football League clubs, only two clubs offer a day out for less that £20. Those clubs are Huddersfield Town and Sheffield United. This is a stark contrast to last season where 12 clubs could offer a day out for under £20.  As a result, average attendances on the whole are down in the Championship, League One and League Two this season.

14 of the 18 clubs that were in the Championship for both the 2011/12 and 2012/13 season have seen their average attendances drop this season. This is a stat which suggests that more fans are turning their backs on clubs because the prices to go to matches are not affordable.

It is a similar story in League One where 16 of the 18 clubs that were in that league this season and last have seen average attendances drop. The same can be said in League Two also where, like the Championship, 14 out of the 18 teams have lower average attendances this season as opposed to last.

So to conclude, these statistics show that on the whole attendances are down in the football league compared to last year. More and more fans are staying away because they feel that they are not getting value for money. Fans may go to the odd games throughout the season instead of purchasing a season ticket because they are simply unaffordable.

Clubs need to start thinking more about the fans. Clubs like Sheffield United who have various offers on for example ‘quid for a kid’ often get good crowd attendances from this and more clubs should follow suit.

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