It’s day two of this year’s first pre-season test. I’m in McLaren’s hospitality suite, awaiting McLaren Racing CEO Zak Brown. He hadn’t planned on granting one-on-one interviews, but made an exception to discuss the team’s rebuilding programme with RaceFans.
So I wonder how Zak will play it. How does he plan to push the team forward to the stated objective of race and championship-winning form without raising expectations uncomfortably high?
“Our expectations are the same as everyone’s expectations of McLaren expectations,” Zak says without hesitation. On first hearing it sounds like gobbledygook from the American sponsor guru turned team boss. But his statement adds up: there are expectations, and not only inside McLaren. F1’s second-oldest continuously-running team – after Ferrari – carries the weight of expectation season-in, season-out, regardless of reality.
“Our expectations are to get back to winning world championships. But what we want to do is manage our own expectations on the journey that’s going to take us there. The desire’s there, the expectations are there, but it’s going to be a journey and we needed to reboot, which we’ve now done.”
Given that he has now been with McLaren for a touch over two years, how far into this journey towards redemption is the team?
“We don’t yet still have all the people that are to come, to lead the journey. Specifically Andreas Seidl [managing director of the F1 operation] and James Key [F1 technical director].” Note those titles, as Brown is responsible for McLaren’s full spectrum of racing activities, not only F1. For example, ex-Force India deputy team principal Robert Fernley is responsible for the new IndyCar project, reporting to Brown.
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Clearly Brown rates Seidl and Key highly enough to be prepared to hang about for eight months for their respective ‘gardening’ vacations to end. But these are just two of a raft of appointments he has made since sliding his feet under the table. Engineering director Pat Fry has returned to the team, while former IndyCar team boss and Indianapolis 500 winner Gil de Ferran moved seamlessly from consultant to sporting director for all racing genre.
Seidl starts on May 1st; following this interview the team confirms Key’s start date as March 25th. McLaren’s building blocks are gradually falling into place.
“So I think we’ve [now] got the talent. Andreas, who’s an engineer by trade and a very determined individual, I think he’ll do an excellent job with James, Pat, Andrea Stella [performance director], Simon [Roberts, the team’s long-standing operations manager], and Gil.
“We’ve made all the other changes, so I think we’ve got our team now. But it’s going to now take time for that all to come together, and then the headwinds that we face by being outspent five to three by the other three teams, that needs to correct itself with the  Liberty rules.”
Is he’s downplaying the team’s budget? There is a touch of reality to that comment, as our team budget comparisons prove. Against that background, what timeframe does Zak foresee before McLaren is once again a genuine title contender?
“I think it would be unrealistic (that word again) to think a championship is on the cards in the next few years. I think what we’re trying to set on ourselves is that we just continuously move forward, but we haven’t said, ‘here is the championship’ or ‘there is the championship’.
“It’s constant forward progress. We also have two new drivers, one is brand new to the sport, so that’s a journey. It’s all about planting the seeds, then watering the plant.”
Given where McLaren ended 2018 – sixth in the constructor classification – and the team’s stated target, would it be realistic to assume they’re looking at progressing at the rate of one placing per annum?
“I don’t think we’re going to be drawn on specific numbers. I think moving forward every year is our goal. We actually haven’t even really thought about that, in a numeric sense.”
We’re joined at the table by majority owner of McLaren, Sheik Mohammed of Bahrain. I wonder whether Brown will change tack in the presence of his ‘ultimate’ boss, but he continues without even a pause for breath.
I throw a curveball, curious to see how Mohammed reacts: Every season spent in the nether regions of the championship classification costs the team in lost revenues, both sponsors and F1 income. Mohammed watches intently as Zak responds: “Yes, of course obviously the better you do [the more money is earned].
“A couple of things on that one: One, we’ve got a very committed set of shareholders who have given us the remit to get back to winning races and championships.
“I’ve put together a five-year plan. We’re hitting sponsorship targets; we’re bringing on more partners than anyone else currently. We’ve had another very good off-season in that sense. Obviously [FOM] money this year is better than it was last year, finishing sixth. So I think we’ve internally set a realistic budget, realistic timeline, realistic on-track and off-track goals to get us back to fighting for the championship.”
As it turns out, last year McLaren received around $75m in FOM revenues after a lacklustre 2018, but this year should pull $100m if Liberty delivers as projected. Add in healthy boosts from various sponsors, including British American Tobacco and its ‘A Better Tomorrow’ message (believed to be worth upwards of $30m), and McLaren’s war chest looks stronger than for many seasons, including the lucrative but ultimately disappointing Honda period.
But the team faces three different challenges: a commercial restructure, internal reorganisation, and on-track performance. The team seems in good commercial health and personnel appointments are coming together. But on-track performance – which ultimately drives the ability to raise revenues – they are still a long way off race-winning pace.
There was a time when world champions lined up at McLaren’s door, begging drives. But who among them, with one on his way out, would drive for McLaren right now?
“I think, given where we’ve been – we’ve had a world champion up until last year – I think with this reboot and rebuild we know we’re not in a position today to compete for the world championship. So you’d rather take two drivers and bring them along that journey, because I think both drivers (Carlos Sainz Jnr and Lando Norris, for 2019) have tremendous potential.
“Also, you want to spend your money on what makes the car go fastest, and right now I think these are the investments that we’re making in the car and the team and the factory that will make a bigger difference . So I’m not concerned that we don’t have a current world champion, or even a race winner.
“We’ve got a rookie [Norris] in the car, so obviously he’s had no results other than being a champion in almost every series he’s been in. And then Carlos is very, very strong.”
I point out Fernando Alonso has departed F1 because he knows he has no realistic chance of winning another F1 title any time soon and had no other options available, and McLaren’s 2019 driver line-up is unique in that the pair do not have a podium place between them.
Zak responds that the former is a matter best responded by Fernando, but qualifies his comment: “Yeah, obviously if you’re a world champion you want to win the world championship next year…”
Complicating matters for McLaren is the question of F1’s much-vaunted budget cap. How can it plan a restructuring of this complexity in the knowledge that a budget cap is coming. In other words, how to ensure that quality rather than quantity of people prevails?
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“I think we’re in a pretty good spot, depending on where the budget cap comes in,” Brown says in an obvious nod to the fact that F1 has less than two years to go until the cap is supposed to arrive, yet no levels have been decided. “We’re kind of playing around there [in terms of numbers] now, so you’ve got some teams that still won’t be able to get to it, and then you’ve got the other teams that are going to have to lay off hundreds of people.
“Depending on where Chase [Carey, F1 CEO] lands, I think we’re going to be doing fine-tuning. The other nice thing is it will be disruptive for employers – we’ve got a great automotive business that continues to grow, we’re doing the Indy 500 and maybe we’re going to do other forms of motorsport in the future.
“I think we’re also going to be in a [better] to address employee movements, headcounts, probably better than other race teams, which is great because I think if I’m working in a race team and I know three, four, five hundred people are going, that’s not going to be a great.”
In terms of the FIA’s International Sporting Code and in the absence of overriding agreements F1 is obliged to provide 18 months’ notice for major regulation changes, so 30 June for 1 January 2021 introduction. Is the sport in danger of rushing them through, possibly resulting in some unpleasant consequences?
“I think any time you have a rule change, for sure there’s going to be some unforeseen, unintended consequence. I think that’s inevitable. I think it’s about jumping on that as quickly as possible when that pops up,” he says.
“They’ve been doing a lot of work with teams and internally – I think we’re all hopeful that when they roll out the rules on June 30th they’re pretty buttoned up, but for sure there’ll be areas that need to be addressed.
“But they’ve been putting in a lot of work in for a long period of time. They haven’t shown much, so I think we’re all sitting here a little bit in the dark, but I’m hoping they’ve done a lot of work. They’ve wanted to intentionally keep everyone in the dark so we won’t then get too much of a head start.”
Consistent with that view, various potential budget cap figures have been mooted at different stages. What figure is Brown hoping those in charge of the sport settle on?
“I think this sport is spending way too much money. I think a 150 million budget cap, with what they are talking about being included and excluded, is achievable. It’ll be difficult, and difficult for everyone, but I think long-term it’s what’s best for the sport.”
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Then he expands on the topic, but adds a slight American twist: “At 150 million you should be able to get enough prize money and enough sponsorship to run at the budget cap and make money, no matter who you are. If you want to race at 130 and make 20 and not spend 150, you should be able to have that option, too.”
Is he suggesting that F1 teams should have the option of making profits, a status few if any consistently achieved over the past ten years?
“Yes, a race team should make a profit,” Zak says emphatically.
Why, then, do most folk in the paddock think making profits, in other words putting profits before performance, is a sin?
“I don’t! I mean, that’s why I think the budget cap should be down to 150 million. If you look at every other major sport franchise, they’re worth billions. And [F1] teams now are trading for administration. [Look at] Force India; Sauber was close to administration; Renault when it bought it from Lotus was in towering debt.
“Help me understand how the LA Clippers [basketball team], who are not a top team in the NBA, which is the third or fourth biggest sport in one country, is worth two billion dollars versus – I don’t think there’s probably a team in here worth two billion dollars in a sport that on the whole is much larger.”
Zak is clearly on a roll…
“If you want to run a Formula 1 team right now you have the privilege of burning through – pick a number: 50 million, 100 million, 200 million. And basketball teams, they don’t make a ton of money, but they’re great assets that appreciate, and they make money
“The [Liberty-owned] Atlanta Braves are worth 2.5 billion, they kick off at 20 million and free cashflow. If you own it, you know the franchise value is going to go up, and it’s going to pay for itself. Because I think fundamentally these race teams, given the size of the sport, you get a race team making 10, 20, 30 million or so, these teams should be worth a billion dollars, two billion dollars. But we’re a mile away from it.”
(When Liberty acquired the Braves from Time Warner in 2007, the franchise was valued at $450m.)
Is it not dreamland to believe F1 sponsors will happily shell out tens of millions in sponsors fees in the knowledge that costs will sink and teams turn a profit? In other words, won’t the rate card sink in sympathy with spend?
I sense a change of hats, from team boss trilby to salesman cap. “No,” says Zak, “I think the view is sponsors pay what it’s worth. When you buy that or I buy this or I buy this, I don’t decide what that watch is worth because of what its margin is. It’s worth it to me.
“I think sponsors pay based on value, not if I’m making 75 million and therefore ‘I’m going to pay less’. I think people buy based on value, not on ‘What’s that impact to your bottom line?’ Whether it’s a house you’re buying, or mobile phone.”
“It’s not like-for-like, so even though my sidepod is the same sidepod as nine others, [my pitch would be] ‘North America is big for you? I’ve got a North American proposition’ It’s our job to create a commercial proposition. If you’re shopping on ‘what’s the cheapest deal in pit lane?’ we’ll lose that deal every time. If you’re shopping for ‘what’s the best value?’ that’s the proposition McLaren’s coming from.”
It’s been a fascinating 30 minutes – Zak’s commercial brain ticks over like none other in the pit lane, and it’s been a lesson in selling to observe him overcome whatever “objections” or comebacks I’ve thrown at him.
He’s done it logically, persuasively, charismatically, and above all, in the process he’s thrown the gauntlet at the rest: The only way to survive in this business is to deliver performance and profit simultaneously while keeping expectations firmly in check.
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