FORUMula1.com - F1 Forum

[myownalias]

SRC: http://www.bbc.co.uk/news/business-11158296

A group of the biggest corporate sponsors of Formula 1 have launched a new organisation, which will lobby the sport's power brokers on their behalf.

The firms which provide much of the sport's revenue are becoming increasingly concerned that their interests can be ignored when decisions are being taken.

It intends to recruit the top 100 sponsors currently involved in F1.

But F1 chief Bernie Ecclestone called it "silly".

The association, called Formula 100, held its first meeting in London this week.

Its membership so far includes some 30 firms, including Total, Shell, Santander and Allianz.

On the face of it, Formula 1 provides a golden platform for any company which wants exposure for its brand. It claims to have a worldwide television audience of 520m, across 187 countries.

But being an F1 sponsor doesn't come cheap. The average deal is worth $4.1m (£2.6m), according to analysts Formula Money.

Little say

Collectively, commercial backers are expected to spend more than $720m on the sport this year. By way of comparison, the owners of F1 teams, including car manufacturers Ferrari, Renault and Mercedes, are investing just over $550m.

Yet sponsors have comparatively little say in the strategic decisions which will decide the future of Formula 1. These are taken by the Formula 1 Group, which holds the commercial rights to the sport, and the governing body, the FIA.

Many of those decisions are taken with one priority in mind - to increase revenues.

The F1 Group is majority-owned by private equity firm CVC Capital Partners, which borrowed heavily to buy its stake. It needs cash to service its debts.

Expanding calendar

The teams which take part in F1 also want to maximise its commercial revenues, because they take a 50% share of the proceeds.

As a result, Formula 1 has been expanding its calendar, holding more events - and holding them in places where governments are prepared to pay very high fees for the privilege of hosting a grand prix.

New venues in recent years have included Abu Dhabi, Bahrain, Singapore and Turkey. In October, the Korean Grand Prix will take place for the first time.

While this might enhance F1's global image, it hasn't always pleased the sponsors, because for many of them the new events take place away from their traditional markets.

"The physical, geographical direction the sport is taking at the moment is a real concern for many of our members", says Christian Sylt, one of the founders of Formula 100.

Collective voice

Sponsors have also been affected by recent moves to cut costs in the sport - for example, by reducing the amount of testing teams can carry out during the season. While that saves the teams money, it deprives sponsors of valuable opportunities to entertain their clients.

F1 is no stranger to disputes between its main stakeholders. But while the teams have found a strong collective voice through the Formula One Teams Association, sponsors have traditionally stood alone.

The new association is the brainchild of Formula Money, the sporting consultancy Right Formula and the organisers of the annual Motorsport Business Forum.

It is intended to give the sponsors a platform - and allow them to speak with one voice to the sport's ringmaster, Bernie Ecclestone.

But the man himself takes a rather different view - and dismisses the new venture out of hand.

"The sponsors know exactly what they're doing when they get involved in F1," he says.

"They're all run by people who are over 21. We speak to the sponsors all the time. I see them at Grands Prix and I talk to them."

"The people behind this thing have no investment in F1. They're just being silly."

It looks like many of the sponsors are not happy with Bernie taking F1 further and further away from the European and Americas markets. Of course Bernie who lives in cloud-cuckoo-land has dismissed the new association out of hand; will sponsors start dropping away if FOM/Bernie don't start to take them seriously; if sponsors don't think they are getting a good return on investment then they should pull out and let CVC find the cash to repay their debts from other sources.

[vaptin]

Sponsors shouldn't have too much power in f1, they should simply pay the team in return for the advertising and pr stuff. I think I like the balance where its the teams who have to convince the sponsors to sponsor them, and the sponsor get their interests represented indirectly through the teams talking to the FIA and trying to get changes which makes sponsorship more attractive. Of course the problem with that, is some teams are more dependent on sponsors than others, but I think that needs bigger structural changes to try and make sure the main source of revenue for all teams on the grid comes direct from them so to speak - ie competing in f1, selling merchandise rather than relying on sponsors who will of course then be able to dictate to the team ( eg bringing in a more marketable driver) if they're carrying the main finical clout.

[myownalias]

It's not just sponsorship of teams; it's sponsorship of the FIA events themselves; all the advertising hoardings that we see around the tracks. As F1 seems to be moving into the Middle Eastern and Asian markets more and more; a lot of sponsors are annoyed as that is not where their business is most profitable. Bottom line here is that sponsors are a businesses first and if the ROI does not match expectations they will walk away from F1 to look for cheaper sponsorship opportunities, lower formulas maybe? Which is likely to be detrimental to teams, especially non manufacturers such as Williams, Sauber and the three new teams coming into F1!