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Brawn confirms Liberty considering budget cap

F1 Fanatic Round-up

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In the round-up: Ross Brawn wants a discussion around the feasibility of a budget cap.

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Liberty Media intend to keep pushing F1 towards pay television channels but @JCost argues the sport can thrive without free-to-air coverage:

The same way your trusted friends tell you to watch a Netflix series, that’s how I became a Netflix client, and others got the word via typical news outlets reporting the quality of the shows and service.

I’m a big basketball fan and I play the game with my friends every single Friday, three years ago not many people was watching NBA games regularly but the explosion of Golden State Warriors and Steph Curry fun way of playing the game and incessant Instagram short videos and highlights posted on Facebook and YouTube brought back many old fans while drawing attention of scores of new fans who are now regular viewers.

We can question the economic feasibility of subscription TV model but let’s not fool ourselves about the financial sustainability of the free-to-air model.

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  • 64 comments on “Brawn confirms Liberty considering budget cap”

    1. Budget caps address precisely *nothing*. It’s pitifully easy to circumvent them unless your auditing is so over the top and invasive that half your expenditure is the cost of the auditing.

      How about this: We’re talking about the pinnacle of motorsport here. Let’s distribute most of the revenue evenly across all teams other than a relatively rather smaller pool of prize money and a somewhat small amount for the Liberty folks, then get rid of the budget caps and engine / gearbox lifecycle management and just let the teams decide what they want to spend their money on. If they waste it, they go out of business *as they should*. If they don’t waste it, they’ll gradually improve their lot over time.

      There is plenty of money in this sport, and no need for budget caps. The real problem is that the sport has been treated as the personal piggybank of one Bernard Ecclestone and his corrupt buddies for far too many years.

      1. I am quite sure that a budget cap WOULD actually be able so solve some issues. Off course it would have to not be voluntary.

        Look Brawn was in the middle of having the agreements in place, he has been part of huge Ferrari and even bigger Mercedes. He has seen Honda intimitaly from the inside too. He would know if it really was not possible to police.
        International accounting standards say differently.

        The most important thing Brawn stresses however, is that they should start discussing things and start implementing things to start off towards a path were smaller things are capped one for one and go at it gradually to improve the situation. Not a giant overhaul that no one is really sure how it will work at once.

      2. Budget caps really aren’t that hard, the problem is everyone is thinking about trying to police the 250 million + that the likes of Redbull and Mercedes are spending. Their budgets are way too big! If the sport returned to teams the size they were in the 90s, where a budget of tens of millions was all that was needed, and everything was run out of one factory, it wouldn’t cost that much to keep it under control.

        Think of an operation more along the lines of Manor. I’d happily see a grid full of smaller independent teams fighting with smaller budgets than the handful of teams with mega budgets that we see today, even if that means the likes of Mercedes, Honda, and even Ferrari walk away, it would open the door up to sooo many more.

        1. @samandrew

          You’ll find budgets in top teams in the 80’s and 90’s where a lot more than 10’s of millions.

          They had test teams constantly testing, unlimited wind tunnel, unlimited testing, unlimited CFD.

          The current testing and dev rules have been put in place precisely to try and curb expenditure.

          1. There were plenty of teams competing on tens of millions. Not sure how accurate, but I’ve read Benetton spent $43.3m in 1995. Even if that’s out by 50-100%, it’s still a lot lot less than top teams have these days. Putting limits on testing and development has little effect on how much money teams have to spend, there’s always somewhere else to spend it.

            1. $43m in 1995 would be about $75-80m now, so it’s not as big a difference as you make out. If that figure is out by 100%, then it’s more like £150m, or around half what the top teams are spending.

              However, was Benetton one of the top spending teams in ’95?

              I don’t doubt that budgets have increased for the top teams, but rather than limiting them (or trying to limit them, as it would be very difficult to accomplish), why don’t they try lifting the lower teams? A fairer distribution of funds would go a LONG way to re-balancing things.

          2. In 1996, the highest budget (Ferrari) was in the region of £50 m, true – but the second-highest, Williams, was £30 m and a typical midfield budget (think 6th-placed Jordan) spent around £17 m. A few backmarker teams tried doing it on £10 m but even then it was the beginning of the end of that era.

      3. First I don’t think budget caps can be enforced with manufacturers as they will have many ways to circumvent the rules. More importantly I think a budget cap would drive the manufacturers out of the sport as they are there to also develop new technologies that they can use in their road cars, and without that, they have no reason to be in the sport. Liberty can’t assume that a manufacturer’s reasons for being in the sport are the same as a drink maker and to do so would likely turn F1 into something that is not recognizable to the current fan base.

    2. Earlier that day: Hey you mister, whats your name? Juan? ok, you wanna buy racecar juan? is good quality car, is original maserato. I make you good price! Common man, look is nice red!

    3. From the guardian article, regarding penalties:

      If consistency, however, is the real aim – and it should be – is it not time the FIA considered the stewards themselves? Currently there are three different stewards at every race drawn from a large pool. Employing a small team of say six, to do the job all season would be a far better guarantee of joined-up thinking week in, week out – as would making more of them drivers who have only recently retired from F1 and are better placed to understand the nature of the racing.

      This is bang on really. The inconsistency is obvious when you look at current driver opinions on many accidents – often they’re different and they would have given a different penalty. It doesn’t take a genius to realise that this is exactly what might happen with the actual stewards.

      I disagree with comment of the day. Netflix you buy because there’s a series specially made for it, but what do you get for your money? Everything on there, pretty much.

      But paying huge subscription bills to sky to watch for a few hours 20 times a year (50 hours, approximately)? Average people who have no want for sky won’t do this. As with many current F1 fans.

      The fanincial stability of the free-to-air model worked incredibly well up until a few years ago. I understand with the super massive corporations taking over it has become tough, but a tried and tested thing doesn’t just stop working without something else effecting it, in this case, the pay-TV deals simply offering F1 more money. The BBC, for example, could have carried on as it was pre-Sky if it had a fair deal.

      1. ExcitedAbout17
        27th January 2017, 9:18

        a few hours 20 times a year

        One thing Liberty will do for sure is that we’ll have way more than 20x a year ‘something F1’.
        They’ll make it a string of big events which will be a lot more in the news. @strontium

        Further, I think that it will be (with so much content) a mix between FTA and PPV/Subscription TV; FTA will get the average (pre-)fan interested, and PPP/sub. is for hardcore fans who daily ‘flock to’ the internet to read the latest round-up.

      2. @strontium Agree with both points. Important ones too.

    4. A budget cap will not work for all the reasons published in this blog over the years, but if reducing costs for the smaller teams to even the field is deemed desirable there is a way it can be done, that way is to fix a price cap on key components and then legislate that any team can purchase those components from the team that designed and manufactured them. For example MB_AMG may want to spend $500million on the PU but other teams could demand those PUs at the budget cap price, say $5m per unit, and they may like Wiliams gearbox at $1m per unit, and RBRs tub at $10m. per unit, this way the smaller teams could start the year with a competitive car even if the bigger teams used their massive budgets to draw ahead by continuous development through the season.

      While I’m on my soapbox I’d like to suggest loosening the design regs. For instance, should the bigger tyres and wider track be mandatory? A small team may very well decide that all they need is better tyres and the engine upgrades to make last years car a winner on the high speed tracks even if they are less competitive on the slower tracks, the more options there are the more chance there is for a lower budget team to find an edge.

      1. I am pretty sure a cost cap could work @hohum. But regardless, after reading what Brawn actually is talking about, it seems that he intends to indeed talk about smaller things one for one to go at it that way and gradually get some caps established for those.

        I think that is a very realistic approach that could work without having to completely rethink everything at once. And i really hope that it will, because we need more cars on the grid and that can only work if a team can be at least surviving at the lower end of the grid.

        I think with what you mention about the tyres, they would then have to still use this years tyres, and probably have an extra disadvantage of having to make more pitstops. Developping new tyres would just for one team would be hugely expensive.

        1. @bascb, 2 thoughts on tyres, drop the single manufacturer, and price cap with the mandatory obligation to supply any team, or Pirelli could simply use the 2016 carcass with 2017 compound.
          You can cap the price of materials but not the price of knowledge and in a company as large as a major automaker knowledge can flow like water from division to division.

          1. you can very easily cap the price of knowledge @hohum.

            You do that by benchmarking serveral of them. That gives you a worth to go from. Every team needs the same bits, so you just need to establish a max you want to allow, and count towards the budget.

            Other teams will probably do their best to show if they feel a team is conning it too.

            I have seen benchmarks done to very detail level even 10 years back between the likes of BMW, Mercedes and Audi on several aspects of their operation, and it was quite accurate and really helped all of them understand where they had weaknesses.
            Would a board seeing that say Ferrari spent 10x more on say new bits that did not get used (because of being crap) want to stay in that position vs. a Red Bull spending less on scrap but 2 times more on development of them? For example

    5. CoTD is very correct.

      As much as we’d all love Free to Air coverage of F1, there is little chance that this is going to viable in the long term, even if rights fees were reduced. The point is this, there is not as much money on terrestrial TV as there once was. People dont watch TV anymore, I know I dont.

      The pay per view model or option is the best way forward. If I could go on Google Play or pay a “nominal fee” to watch a race live, it would be great. We should have the option of paying for what watch.

      For those who have Sky, how often do you actually watch FP1-3, Qualy, Race and all the interviews, analyses? I dont, as much as I’d love to, but I just cant afford the time. 90% of the time, its just qualy and race for me. So why do I need to pay for all the content that I dont watch? I should be allowed to pick and choose. We now live in a world where people decide what they watch and listen, so sport should be no different.

    6. RE: COTD

      Yes the sport could thrive without free to air coverage, but it would need a business model comparable to Netflix to do so. Netflix hooks you with a free trial and archives of convenient material for £7.50 a month.

      If F1 were included with Netflix or Amazon Prime I’d subscribe to one of those, but it’s not. Its price is exorbitant.

      Netflix also came from nothing and grew a customer base based on subscription. F1 already had a viewer base, then cut them off. It would be like if Youtube decided to go entirely pay to view, it would kill it.

      1. Netflix did not invent the shows they sell, that format was used to be in FTA before, just like Amazon’s “The Grand Tour”, they do get less viewers because price will always be a barrier for a big chunk of people but it’s ultimately the future of TV. What I was trying to say is: FTA model is not sustainable financially and an alternative is emerging, and I would not be surprised to see F1 and other major series being aired live in services like Netflix and Amazon Prime in the future. Amazon is reportedly working with partners to stream sport events live in the near future.

        F1 must focus on fixing the quality of racing, FTA is a lost battle.

        1. FTA is very doable, as long as people like Bernie and rights owners do not suck out billions of dollars.

        2. @jcost

          Netflix was never competing with free to air, it was competing with the DVD rental market so it started as a paid service competing with a paid service and doing it better.

          We had F1 as a free to air service, the TV rights holders then decided to switch to a more profitable for them paid service. So you have a happy rights holder in the new setup and a happy subscription-based broadcaster who will have done a cost to benefit analysis to know it would be a profitable venture for them.

          This leaves you with an audience used to a free product, considering the value of paying to view it. And that value just isn’t there, it’s too expensive. So you lose part of your audience. Net result lower viewing figures so fans are clearly less happy, and even though the TV rights holders are still making out like bandits from their deal, the teams who still needed exposure for marketing purposes do worse from the deal.

          Happy TV rights holder, happy TV subscriptions service.
          Unhappy fans, unhappy teams.

          The wrong people are benefiting from a switch to pay to view.

      2. Another similar one is the WWE subscription service – they brought this in whilst there were existing contracts in place with other broadcasters so it may show us how the F1 deals will be done. Like most, they also offer a free month trial to get you hooked.

        The WWE subscription service was introduced in most countries however because Sky complained about it, the UK was last – by quite a long way. Even to this day, Sky sell the PPVs on their box office service. The pricing is hilarious – the subscription deal is £9.99 and gets you access to loads of content including all PPVs ever made. Or you can buy the single PPV on Sky Box office for £19.99 and that’s all you get…..

        It’ll be a similar story when F1’s subscription service takes off – Sky will moan and will most likely continue to offer what will be a vastly inferior product at more than double the cost whilst everyone else signs up to the subscription deal.

        1. UFC is another example of this.

          I completely agree with @jcost. I think people wouldn’t mind to pay if they have a tailored made service, and by this I mean, if we only pay for what we watch, no fancy tv packages with loads of other things.

          Liberty could even do this race-by-race (session-by-session even) via youtube for those that are not inclined to Netflix/Amazon subscription.

          Even a model similar do playstation plus would be a good alternative, with access to video stream, apps and content.

          The problem is, companies like Sky, will try to lobby their way into those clients.

        2. Pat Ruadh (@fullcoursecaution)
          27th January 2017, 12:32

          I would imagine Skys UK exclusivity extends to the net, preventing such a model being adopted until the expiry of the current contract in 2020,unless Liberty would be willing to give it up as a bad job and buy it out.

        3. They’ll need to get the price just right. I’m not paying £10 per race, Even £10 a month is going to make me question the purchase. I guess with one free month that would be £80 for the year. Which if it’s just F1 content I’m still grimacing at.

          They need to tie it in with Netflix of Amazon in all honesty. One of their current services plus say an extra £3 a month for F1 and I’d buy into that. Otherwise, I’m sticking to sourcing it for free.

    7. I hate it when stuff like this happens because it’s done in the best of intentions. Remember what happen last time this was pushed? The teams were going to break off and make a new racing series. Today in the news there are reports bernie ecclestone is trying to create a breakaway series of v10 monsters that people really want or at least some people. I could see this get ugly

      1. And it’s never the ones proposing the caps who suffer the most when they fail…

    8. Budget caps are doomed to fail as noted many times over here. But, budget cuts can take place by way of more budget friendly regs. Using only one example here, front wings. Does F1 really need the kind of expenditures that happen with current front wing aero development alone? Simpler regs that allow for simpler wings should save all teams some money.

    9. Regarding the stewards panle to officiate on all races: Why do they actually have to be at the race if they are only going to be reviewing tv footage? That could be done from FOM HQ in UK. It would make it easier to keep the same stewards officiating for each race sonce you eliminate all the travel.

      1. @kazinho Yeah good idea.

      2. There is a big room at every circuit with a lot of camera feeds, some of which are only local, and local phone lines to every part of the circuit for requesting additional info. It’s a lot easier to have everyone in that room. Also faster. Remember the whole vettel vs verstappen thing were the stewards were investigating, but vettel was already fuming. If you have the stewards at home it will take even longer to investigate and it should be as fast as possible.

      3. Because that would limit the stewarding pool to people who can easily get to the UK base. That’s not good if the intention is to avoid accusations of bias towards the UK (or Western Europe, in mindset if not necessarily in strict nationality).

    10. Breakaway series? I’ll bite. Anything other than this Merc 1-2 procession for years on end.

      1. If liberty walked mr ecclestone without getting him to sign a non compete,id be flabbergasted

      2. As @mog said, I think Liberty must be foolishly naive to have just fired Ecclestone without any concrete or binding agreement. They forget they were dealing with a slimy eel, fox or what have you. This silly mistake will cost them dearly.
        Having said that, bring on the new series, Mr Ecclestone. The more the merrier!

        1. Lol, first of all none of this is confirmed. Secondly, did they ‘fire’ BE? Thirdly, ‘getting’ him to sign something doesn’t sound like the way he operates, does it? Fourthly, a breakaway series of anything near F1 level is going to take massive time and resources at a time when Liberty is already potentially righting the ship and giving teams less reason to leave F1 and potential new teams more reason to go toward F1. Also there are contracts in place and they can’t just leave.

          BE is all about money for himself as Keith’s article has well stated. Perhaps he’s got investors lined up, but anyway it would take a massive amount of time and money outlay, not revenues initially, and I can’t see BE spending his last numbers of capable years spending money. But who knows right…if he can find other people’s money to spend he’d love that. One thing we know for sure…BE will do what BE wants and/or can get away with.

          Not that I’d hold my breath but I think BE should do some good by setting up some sort of karting series, or other junior development program of great quality, with his name attached, so that he lives on beyond his years with some sort of positive legacy that contributes to F1 in the future.

          1. Yes Robbie, time is not on his side at 86. There is that.

            But as far as contracts go, I thought they ran out in 2020? 3 years to build up a break away, with teams/drivers currently disgruntled, more Mercedes/manufacturer dominance and systemic inequality. Many could be tempted to jump ship…

          2. BE is still an advisor, so he can’t have been fired, only demoted. So at the very least, an implicit non-compete clause would be in full effect.

      3. By 2019 Bernard Ecclestone will be 89 years old, who in the world would want to participate in such fantasy led by a man who’s almost a century old? With all due respect, Mr. Ecclestone let it go.

        1. Considering how many times the talk was of a breakaway series from Ecclestone, the irony would be off the chart if he reappeared with his own new series.

        2. I don’t think “let it go” is in Bernie Ecclestone’s vocabulary :(

        3. Evil Homer (@)
          27th January 2017, 13:32

          Exactly- BE will be almost 90 so what smart person will follow him into a break away series?
          Its just not gonna happen!

          Thanks for the service Bernie, but put the feet up and enjoy a martini or the likes old boy, its time!

    11. That Hamilton helmet competition is brilliant. I won’t enter, but what a great opportunity and such a good idea for fan engagement.

      1. It’s a competition he has been holding each season for several years. The guy has a way of engaging with his fans.

      2. just researched it, and some of those design as quite painful to watch.

        love the one that says “I love Nico”

    12. I’m not worried about an Ecclestone breakaway series. Given all his idiotic ideas, it’ll be terrible.

      1. A V10 spec series, tracks lined with sprinklers, barriers and other obstacles. It wouldn’t be F1, but I’d watch it.

        In fact, when you take his ideas away from the premise of actually being F1, they’re even more enticing. More points for feature races, is a terrible idea for F1, as all races are essentially the same in length and value. But in a new series you could totally play with that formula, have longer endurance races worth more points in some locations, or series of sprint races in other locations.

        Not being tied to and having to deal with “this is not the heritage of F1” could actually be a boon to someone with such capital and experience in the industry.

      2. There’s no need to worry about it. It’s either not as good as F1, so we still have F1. Or it’s better than F1, so we have something better than F1. Win, Win!

    13. Budge caps is F1? It brings an old quote about communism by Will Rogers to my mind: “Communism is like prohibition, it’s a good idea but it won’t work”.

      P.S.: thanks for COTD.

      1. As a basketball you must’ve heard of
        Policing of everything is hard, but the effort would be worthwile.

    14. Who is likely to sign up with Ecclestone at the age he’s at. There a reasonable chance he won’t get to live long enough to get a new series off the ground. He really should retire, he can use some of his vast wealth to do whatever he wants, so he should never be bored.

      The problem with a budget cap is that it effective changes every team (even the huge manufacturer teams) in to Sauber. If the big teams can’t spend their way out of trouble and are getting beaten by non-manufacturer teams, it makes them look bad. I’m not saying a budget cap is bad, but there are consequences. I personally would like the manufacturers to just supply engines to teams, and not have their own team.

    15. I think the idea of a budget cap is probably an idealistic way of dealing with a whole lot of issues, but at least there is the motivation to make things fairer financially across the teams. Exactly how that is achived is a big question. I recall hearing a person talking on the sports radio last year, I think he was a coach or such like, and he said there are ways around a budget cap. F1 having a fairer method of TV rights payout is essential than happened for the 2015 season.
      Also a minimum amount of air time for each team, because it seems completely unfair that teams like Manor and Sauber go entire races and get almost no air time. How are teams supposed to get corporate sponsorship if they don’t get air time?
      Unfortunately I don’t think things will be easy for Ross.
      Another thing to worry about at the moment is to find out how well these cars can race together, and especially how well they can overtake. I thought maybe they could have do trial races at the pre-season testing, so they can at least see if they need to make changes to the aerodynamic rules.

    16. The lack of teasers from the new cars is making me itchy

      1. …and just as i say that, Manor show their never-to-be-released car :]

    17. Hamilton is letting his helmet design be done by a competition? Vettel is all over it. He been drawing new designs since the start of last season.

    18. I don’t know why everyone worries about pay TV. We’re all on the Internet. I get to watch any practice, qualifying session or race I like. For nothing.

      OK, they’re not in 4K, but I still get to watch them.

      1. Lots of “us” aren’t on good enough internet to view a TV image in usable quality without excessive frame drops, and lots of “us” aren’t in places where digital piracy is legal and want to be law-abiding citizens…

        1. I wholly accept your first point.

    19. From what I’ve seen of Bernie over the couple of decades I’ve been watching F1, the guy will never, ever retire. He doesn’t have the ‘stop button’ that most people have with regards working and wealth-building, and the only thing he seems to have an interest in is motorsport.

      In 2003 he said “I would get bored and probably die if I retired,” and to me that’s one of the most believable, entirely truthful things he’s ever said. As long as he’s breathing, he’ll be working… like a business version of the Terminator.

      So while I can’t imagine any new series he sets up would be overly successful, and certainly not an F1 competitor, I can see him doing it for no reason other than to give himself something to do, deals to work on, etc. There’s no way he’ll just disappear.

    20. Budget cap is rubbish just to drag the top down to the rubbish at the back. McClaren would support it now as they are no longer top tier they are midfield with ab upper midfield budget acailable, their money is sgrinking without sponsors and success.

    21. I think F1 doesn’t need budget cap beacuse it woulnd’t be realizable/feasible. How could somebody control/check F1 manufacturing teams (like Mercedes, Ferrari, Renault) about their costs and their prices they use in their own business?
      So I think we don’t need budget cap but we need lower costs and fairer (less differences in) money distribution in order to smaller teams have the possibility to reach better results.

    22. Only way it could work is each team is given a set amount of materials they have to purchase for x amount and the cars have to be built from that. A bit like locking the A Team in a garden shed.

    23. This may be overly simplified, but why couldn’t X number of dollars be put in an FIA monitored account and it be required that ALL F1 related expenditures be paid through it? Set a cap of $100 million. That is enough to let the big boys do their thing. Maybe they could use something like moto gp and give the smaller teams (lets say any team that spends less than $60 million) some advantages like softer tires for qualifying or unlimited drs or something as a perk for spending less. If the prize money was more evenly split it would help alot. Or maybe like MLB does, they make the big budget teams subsidize the smaller markets a % of anythinng they spend over a certain cap amount. So if Ferrari spend 10 million over the cap, lets say they have to put 5 million in a kitty to be split with the smaller teams. It isn’t perfect, but it would go a ways to leveling the spread….

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