Start, Canadian Grand Prix, Circuit Gilles Villeneuve, Montreal, 2006

How the CVC era changed F1 – and what Liberty might mean

2016 F1 season

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Not for nothing have outgoing Formula One owners CVC Capital Partners been described as a “vulture fund”.

Their approach is simple to understand: buy a business, extract the maximum possible revenue from it, then sell it on for a further profit. This process, referred to as a “holding period”, typically takes three to seven years according to CVC’s own website.

In the case of Formula One it has taken ten years. This shows what a complex yet lucrative investment F1 was for CVC prior to its sale to Liberty Media.

The latter point can’t be stressed enough. Yes, CVC spent big money to get their hands on F1: one billion dollars in funds plus more again in loans for a total of $2.1 billion. But they reaped the rewards, taking $4.5 billion out of the sport, an above-average return on that initial stake. The sale will make them richer still, and they will continue to profit from it afterwards as they will retain a stake.

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But the changes imposed on Formula One by Bernie Ecclestone in order for CVC to do so well from it have been controversial. The share of the funds teams receive has been a major bone of contention.

Start, Buddh International Circuit
India’s race proved short-lived
This might have come as a surprise as the sale to CVC in 2006 was accompanied by an increase in the share of the sport’s profits being paid to the teams. Previously teams were given a 47% cut of F1’s lucrative television rights revenues and race promoter fees. After the CVC sale teams became entitled to a share in all the sport’s income streams and the size of the share grew to 50%.

But here we are a decade later and some teams are clamouring for more. The reasons why take us back to how voraciously CVC squeezed every last penny out of its purchase.

An eye-watering $230 million was required every year merely to pay the interest on the loan CVC had taken out to purchase the sport. This much was raised – and more – by aggressively exploiting opportunities for profit, regardless of any knock-on effects for the teams.

The calendar is a case in point. On the fact of it this year’s record-breaking 21-race schedule is little longer than the 19 rounds which compromised the 2005 championship. But the big difference is how many races now take place far away from the team’s European bases. Non-European rounds have increased by 50% in this period, and that’s if we count distant Azerbaijan as a European race.

The desire among some governments to buy an F1 race as a status symbol for their countries drove established events off the calendar: France disappeared in 2008 and Germany’s race remains in doubt. Poorly-supported races in India and South Korea came and went. The cost of realigning the calendar away from Europe was largely borne by the teams.

Start, Le Mans 24 Hours, 2015
Manufacturers have shunned F1 for WEC and others
While the dogged independents clung on for survival, after the 2008 economic downturn Formula One was viewed as too expensive by several manufacturer teams. Toyota, BMW and Honda all departed and have not returned, save for the latter as an engine supplier only.

Since then the FIA has revived international sports car racing in the form of the World Endurance Championship and launched Formula E. With shorter calendars focused more tightly on key markets, manufacturers have voted with their feet and shunned F1 for these emerging series. The more relaxed attitude to media rights in these rivals championships adds to their appeal.

Formula One’s attitude to media rights under CVC has been to sell at the highest possible price regardless of the consequences for the sport’s popularity. In many countries F1 has disappeared from free-to-air channels and moved to pay television. Here in the UK the sport will disappear from free-to-air television completely in 2019. Meanwhile in an interview earlier this year Ecclestone quietly let slip a figure which revealed F1’s worldwide television audience has fallen by a third since 2008.

A glance at the cars of ten years ago compared with today’s tells another story of how F1 has changed under CVC. Sponsorship is now much harder to come by. Teams face fiercer competition for the income which has remained. This competition has come not only from rival teams, but F1 itself: McLaren sponsor Johnnie Walker signed up as the ‘official whisky’ of F1.

The effects of all this on the teams might have been lessened had it not been for a crucial change in the sport’s distribution of its revenues during CVC’s tenure as owners of F1.

Following changes in 2007 to the Concorde Agreement – the governing document of F1 at the time – which allowed for an increase in the number of races on the calendar, the teams had grown wary of the likely rise in costs this would bring. Under the umbrella of the Formula One Teams’ Association they demanded, and ultimately received, a further increase in the share of F1’s revenues.

But Ecclestone saw an opportunity to rid himself of FOTA by offering a greater share of the income to a few, preferred teams. This brings us to the present situation, where the likes of Ferrari and Red Bull receive huge bonuses just for showing up.

Start, Circuit of the Americas, 2014
A thin field at the 2014 United States Grand Prix
This had an inevitable effect on F1’s smaller teams. Pay drivers were handed race deals instead of rising stars and toiled at the rear of the field in under-developed cars. Late in 2014 Caterham was on its last legs and Marussia seemed to be following them.

Only an intervention by CVC prevented Lotus, Sauber and Force India from boycotting the United States Grand Prix over the matter of revenue. Even so, the miserable grid featured just 18 cars.

Gerard Lopez, team principal of Lotus at the time, shed light on how the distribution of revenue had hit his team. “Close after [CVC] taking over the business, I think the sport was distributing about around $300m to the teams,” he said.

“Today it’s almost $900m but it’s not distributed equally otherwise we would all be smiling here and saying there is no issue. So the amount might be an issue but certainly the distribution is a huge issue.”

Lotus staggered into 2015 and appeared to be on the brink of collapse until it was rescued by Renault. But the two other teams who had experienced the pain of diminishing revenue under CVC took their complaint to the European Union, a dispute which will now be resolved under F1’s new owners.

How far CVC can be held responsible for the situation of individual teams is a point of debate. The same goes for Ecclestone, of whom it was alleged in a 2014 court case preferred to see them take over the sport because they would keep him in charge. Both parties had an obvious interest in whether the sport was sacrificing its long-term health for short-term profit.

In one of his very rare interviews in 2013, CVC chairman Donald Mackenzie insisted “we do not take money out of the sport”.

Bernie Ecclestone, Donald MacKenzie, Circuit de Catalunya, 2016
Ecclestone and Mackenzie: “Not the bad guys”
“We’re not the bad guys,” said Mackenzie. “We care about [F1]”. He was speaking in response to Force India deputy team principal’s claim CVC had “raped the sport”.

CVC wanted F1 for its capacity to generate income. It would be naive to believe Liberty does not have the same goal.

But as a media organisation Liberty also needs F1 for the content it creates. This may seem a depressingly corporate way to describe a sport, but it contains a grain of hope for those who have a dim view of how CVC have treated F1.

Liberty are saying the rights things about their plans for the future. “We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One and benefit fans, teams and our shareholders,” said president Greg Maffei after the deal was announced yesterday.

Perhaps Formula One’s new owners will think of it less like a ‘show’ which is to be milked for profit in the short-term, and instead as a uniquely attractive sport which, treated correctly, can remain profitable for the long-term.

Or perhaps too much damage already been done.

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Author information

Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

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  • 33 comments on “How the CVC era changed F1 – and what Liberty might mean”

    1. “Toyota, BMW and Toyota all departed and have not returned…” That third is Honda, I think. :)

      1. Toyota, BMW and Honda all departed and have not returned, save for the latter as an engine supplier only.

        You should have gone to Specsavers..

        1. @melthorn Keith corrected it.

    2. Good article. If the new owners will let me buy a full season streaming package for F1 like I can for MotoGP, I’d be happy. It’s a dream I have, I know…

      1. It’s not just you! I’ve been dreaming of a Netflix-style streaming service for a long time now. Honestly, why should I pay an extra 20€ a month to be able to receive a bunch of TV networks, only one of which brings F1 on my Telly (with ads and horrible German commentators), if I already have high-speed broadband? I’d rather spend that money on a dedicated F1 streaming service with all sessions live in HD and content like vintage races etc. I want value for my money!

        1. We should have had this facility years ago! Even youtube could have been used.

          1. Dedicated collectors of motor sport and f1 like myself have learned that all the material is available on the internet , you just have to know where to look (private tracker torrebts)

        2. They are not that horrible ;)

      2. @heartbreakridge @wallbreaker @jaymenon10

        As i’ve said in the past, The biggest reason that there isn’t a streaming platform is because the broadcasters traditionally buy exclusive rights to distribute F1 content in there region & over recent years that has included online distribution.
        In the UK for example Sky (Split with Channel 4), Like the BBC & ITV before them have this exclusivity clause which would prevent anyone else from distributing any of the F1 content in the UK which the broadcaster has brought the rights for.

        You mention MotoGp but its worth pointing out that what content & passes are available on that service are dependent on contracts with broadcasters in each region.
        In the UK for example you can only buy the Multiscreen season pass (Most expensive option) while in North America you can buy one of upto 6 passes of various cost (Season, Monthly or per-race as either Standard or MultiScreen options).

        Again in the UK while DTM, Formula E, Formula V8 3.5 & World Rallycross also offer live streaming Via YouTube; These are all Geo-Blocked in the UK due to the deals in place with the respective broadcasters (BT Sport, ITV/Channel 5 & EuroSport).

        This is how broadcasters make back there investment, They pay for the rights to show the content & then want to get as many viewers as possible because via there own subscriptions and/or advertisers the more people watch the more money they make back. If there is an alternative service available which works out cheaper then they could very well lose viewers/subscribers which means they make less, So they go for Exclusivity clauses & Geo-Blocking to try & maximize there own viewership.

        1. There are plenty of F1 fans out there that can only afford to watch free to view TV, Why should we have to pay to watch our favourite sports AND still have to buy a TV licence? The sport (all sport) should available on free to view TV for all to watch if they wish!

          1. “The sport (all sport) should available on free to view TV for all to watch if they wish!”

            Problem is that FTA broadcasters can’t afford what it now cost’s to produce live sports & thats a big part of why live sport has been vanishing from FTA over the past 10-15 years.
            There paying for the rights, There paying for the satellite time to broadcast it, There paying to send crew/equipment out as well as all the accommodation for the crew & of course there paying the crew. With a sport like F1 that travels around the world as often as it does, The transportation cost’s alone put a sizable dent into the yearly budget.

            The PayTV broadcasters have significantly larger budget’s so all of that cost isn’t an issue for them, The FTA broadcasters simply don’t have the budget’s to throw at sports which at the end of the day make up only a small fraction of there overall viewership.

            1. I can imagine that ad revenue isn’t enough any more, with so many broadcast channels and so much advertising moving online.

    3. “raped the sport” is the perfect description of the CVC era.

      1. CvC us a hedgefund. Hedgefunds only existing for profiteren and are merely vultures who come in, rape/consume/extract until everything has ‘dried up’ and move on. All for the sole purpose of creating monetary value for it’s shareholders. That’s what they are and what they exist for. We can’t blame them for being what they are (other than having our pension funds etc invest elsewhere, but thats a different discussion)

        Liberia Global is in it for profit as well but they generate profit in a different way. They create value for their costumers which should at least mean they’ll do 2 things: 1 try to improve the show and 2 market the show to key target groups better. Now, wether they’ll improve the show for the better of F1 as a sport remains to be seen. If done poorly you’ll end up with dumb gimmicks and such. But at least it has the potential to be positive

    4. I think you mean does not have

      “CVC wanted F1 for its capacity to generate income. It would be naive to believe Liberty does have the same goal”

    5. Nice article Keith !

      Of course Liberty want to make money out of Formula One (it would be a very strange investment if there were not).
      But I think the issue here if they are willing to give a bit back to the sport rather that rape n’ pillage at all costs, like CVC have always been accused.

      But as Keith points out over 10 years of control some rich fat cats are richer and our sport MUCH poorer- when champions like Fernando are so preplexed about F1 we have issues- yeh he has made more than most would dream of but that is not what makes (most) F1 drivers tick.

      Tickets are too expensive for the most part. You can get a cheap GA for the weekend and see some good stuff. But if you want to see the in’s n out’s you need Hospitality. Get a grid walk (very cool, but seen two you have seen 100), get the occasional driver for a photo and a quick chat and a team cap you paid for already on he way in.

      If you do it in style you do the Paddock Club. I have been few times (always paid my own way except once one HB snuck me a ticket) and to take my lad now (10y.o.) will cost me $10K AUD, go Singapore or Monaco make that $20K. Absurd!!

      My lad this year in Melbourne had such a great time, met most drivers, and he had the time of his life.
      But I cant take him again like that at those prices – a good weekend with reasonable assess for proper fans at a reasoanble price would be good (maybe you need to pass the F1F Quiz for this) LOL

      Just hoping but lets see Liberty reduce prices and let the fans see a bit more access to F1 like the old days.

    6. Excellent article.

      I think it will be a positive change compared to the way CVC has managed the sport. We will likely have much improved audience figures which will equate to greater interest in sponsors. And even if it will require several years to complete contracts with the pay-tv channels, I think we will see a return to free viewing – it probably makes business sense to maximise the audience numbers.

      That said, and on a different topic, I must say that SKY UK’s coverage of the sport is exceptional. Much better than any programmes on terrestrial channels I ever saw.

      1. That said, and on a different topic, I must say that SKY UK’s coverage of the sport is exceptional.

        I agree. However, so it should be when you have to pay £570/yr (£27 per race) for it*!

        * Assuming you have no other Sky TV. Even if you do have a non-sports bundle, you pay £330/yr (£16/race).

        1. Is it that expensive?! :Oo

    7. I don’t know what will happen but the product needs to improve, fast. What I want when I watch any sport is getting the feeling that what’s done there, what I see on the telly, it’s impossible for a normal human being to do.

      I was watching MotoGP’s race at Silverstone yesterday, a replay. Watching those guys slide around corners, milimeters from each other, you just realize they are heroes, they do the impossible on board of those bikes. You don’t get the same in F1 anymore. You compare F1 to those onboard cameras from IndyCar, and it’s like F1 drivers are sitting in a sofa in their living rooms casually moving the steering one way or the other.

      And the way they show it, MotoGP has multiple cameras, gyro cameras, they were showing the battle for 2nd place and there was a window showing Viñales, on the lead. It’s like they care a lot more about the viewer, they show more, they don’t miss any action. F1 spends 10 minutes replaying the starts every GP, on lap 3.

    8. Excellent article, Keith.

    9. Knowing Liberty has bought Telenet, a Belgian Cable company, and the way Telenet has shifted from expanding it’s network and the content to a pure profit generating cow, I have no hope at all that F1 will be handled much better than it was under CVC. On the other hand, I guess CVC thinks the cow is dying or drying.

      1. Nothing will change so long as fans are willing to be milked like cows. Rather than rebel, they dutifully open their wallets. No wonder rape is the new business model, it works. Expect more paywalls and higher prices until the viewer gets a clue. It sickens me to hear people praising Sky when all Sky is doing is extracting cash from the deluded. I guess if I was in Liberty’s position I would turn the screws too. It is money for nothing.

    10. “We think our long-term…”
      Seeing them use the word long-term is enough to make me hopeful.

      And while I agree that the way CVC has handled the sport has been bad for midfield teams, I disagree that they are responsible for the current use of pay drivers. Pay drivers have been a thing for the past 40 years and the current grid is surprisingly competitive.

    11. First order of business: start using camera lenses which don’t make the F1 cars look pedestrian, and like a tractor could pull off that corner at the same speed.

      1. They just need to change the angles. Film from the sideline of the straights rather than from the front. They did some of that at Monza which was great. Also chopper views are good.

    12. Very nice after-work read for me. It was pleasant. Thanks Keith.

    13. great article, thanks for that insight!

    14. I’ve just read this on the BBC site “The new chairman of Formula 1 will be the elaborately moustachioed Chase Carey, the executive vice chairman of Rupert Murdoch’s 21st Century Fox.”
      Please note that he’s not the ‘former executive vice chairman’, he would seem to be the current one.
      So if Mr Carey is going to be in charge of F1, and he reports to the owner of 21st Century Fox who is the same chap that owns 40% of Sky, then there is little hope for F1 to ever emerge from behind the paywall. After all, Murdoch isn’t going to let Carey devalue Sky’s investment in television rights, is he?

    15. This article seems to do its best just to make CVC sound bad. Many things being blamed on CVC that wee happening anyway such as the move away from F1s European heartland to wealthy developing nations. This began in 1999 with Malaysia and then in 2004 and 2005 with races in China, Bahrain and Turkey all prior to CVC. The trend simply continued although in fairness, CVC probably encouraged it rather than tried to stop it.
      The loss of sponsors in F1 I believe is down to three factors: the loss of cigarette money after being banned, the withdrawal of several key manufacturers after the GFC and the fall in viewing figures.
      The first two things I listed have nothing to do with CVC so how can they be blamed, and while those manufacturers have not returned neither has the global economy.
      And to say that the fall in viewership in F1 is down to CVC management is completely unfounded. While it might make sense that a switch to pay TV would reduce viewing figures, there may also be other factors at play such as the rise in other competing entertainment areas such as streaming services and other sports. It may be that F1 viewing may have declined if CVC had not changed anything because the world has changed. We can only speculate so it’s not really fair to lump every negative thing to happen to F1 on CVC.

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