Archive for the ‘ F1 Business ’ Category

Reflections on the Monaco forum

The 2009 Monaco Motor Sport Business Forum is over and I’m writing this on a wobbly table in the work-in-progress that is Nice airport.

There’s been a lot to take in: hours of recorded speech which will take a few weeks to sift through. It’s been a fascinating couple of days – although when the lady from Porsche dropped the word “emotionalisation” into the mix, mid-way through a marathon session of death-by-powerpoint, I was briefly gripped by the urge to throw something. Apart from that, and a couple of changes to the line-up that had been circulated before the event, it was an overwhelmingly positive experience.

Part of the reason for coming was to take the pulse of the motorsport economy, and hopefully not reprise the Groucho Marx gag, “Either he’s dead or my watch has stopped.”

So how is the patient? Certainly not suffering hallucinations. There was little of the gaga optimism that was epitomised last year by Donington’s Simon Gillet, although the otherwise eminently sensible Tony Fernandes was a little premature in talking about getting to the front of the grid. You have to be a bit crazy to do what he’s attempting, but at least he has a solid and successful track record in business, and he doesn’t change the subject when you ask where the money’s coming from. He is one of those scruffy millionaire types that demonstrates their abilities with the cut of their jib rather than the cut of their suit.

There is a clear division on the subject of new media: the panellists on the first day took what I’d call a more progressive view, talking about how there was no point in trying to charge the public for content they can find for free, and challenging the notion that having a high number of unique visitors was a worthwhile metric. If I were to level a criticism at this view, it’s that the people who subscribe to it are still somewhat unclear as to how to ‘monetise’ it.

Ah, dread word! Rather like ‘decimate’, this uncomfortable-sounding verb is undergoing a transition through popular misuse. Technically it means to convert debt into currency; in the hands of internet proponents it describes the process by which they try to rifle your wallet while you browse.

I digress. On the second day we were firmly in the territory of the numbers merchants, as delegates from World Superbikes, World Touring Cars and MotoGP bludgeoned us with data, including how many millions of unique visitors they had on their websites. The bad mojo had clearly leaked into the computer system, which would sporadically refuse to change slides when they clicked the remote.

The common ground between these camps is that they are still scratching around for a way of establishing a revenue stream. Most websites still don’t make money, and even the ones that do are not generating enough. Expect to see, over the coming year, more ‘free’ widgets and games that are driven by data capture. Once they know your email address, how old you are, and what you’re interested in, that data becomes a saleable commodity. When entrepreneurs talk about ‘personalisation’, this is what they mean.

It’s becoming clear to the business community that having high traffic volumes doesn’t equate to profit. That may not come as news to many of you, but don’t forget that the internet is still like the Wild West to many people in business. For many of them, their only interaction with the industry is when they decide to revamp their website(s) and invite tenders from web design companies, only to be deluged by flim-flam. They must feel like the bemused punter in that Not The Nine O’Clock News hi-fi shop sketch.

My colleague and patron Ian Burrows nailed this during the media panel yesterday:

YouTube and Twitter have millions of users but they don’t make any money – although some people are using Twitter to create revenue, Twitter itself isn’t bringing anything in.

This may change over the coming months. The much-derided new retweet system is clearly designed as an enabler for e-commerce (or, to put it another way, a means of enabling people you’ve never met to pop up and try to sell you something).

The WRC is embarking upon a big project to engage viewers over the internet. This is laudable and I hope it demonstrates the virtues of openness, but we’ve got to face facts: as a championship it has nothing to lose by giving its offering away, because that offering is worth a fraction of F1’s value. As an example of the relative magnitude of the F1 audience, around 90 per cent of the monthly page impressions on are for F1 news; the next largest sector is MotoGP… at five per cent.

We are told that there are web developments afoot in Princes Gate, but don’t expect to see the wholesale liberalisation of TV footage – or a plethora of interactive feeds – just yet. Bernie is wary of investing huge sums in new technology after the debacle of his interactive TV service, which cost megabucks to set up and run (the digital TV compound and the equipment in it took up most of a 747). The only way to justify it was to put it on a pay TV platform and charge a premium. It was a flop then and it will flop if they try it again – unless the premium is a sensible one.

Uh oh. An elderly American couple has sat at the next table and are giving a running commentary on the people coming through the security gate. This is hell. Must dash.

“Motorsport has its issues,” says Eurosport executive

Jacques Reynaud, the vice chairman of Eurosport, gave the keynote address at the Motor Sport Business Forum this morning. He enlivened what had been for the most part a fairly plodding presentation by launching into a demi-rant as he reached his conclusion.

Manufacturers, teams and drivers have to be more consistent about their involvement. Sponsors must continue to activate their support. And motorsport must realise it is in hard competition with other sports.

All parties must realise that they have to stop badmouthing the sport. Yes, it’s part of the game, all this talk of double diffusers and handicap weights, but in no other sport do people systematically complain about the rules and systematically threaten to quit the sport. In no other sport to players pull out, publicly and loudly, to join other series.

It is my gut feeling after 17 years in sport broadcasting that we have reached a critical point. How can fans engage, how can television invest long-term, if motorsport people badmouth, complain about, or even turn their back on the sport because they haven’t got what they want from the organiser.

That shook us from our torpor.

Eurosport broadcasts Formula 1 and MotoGP in some territories, and its events subsidiary promotes the Intercontinental Rally Challenge and the World Touring Car Championship. The WTCC has been wracked by internal strife this year; SEAT has publicly chafed about a handicap measure introduced to limit the potential of its turbodiesels, and BMW has been complaining about weight penalties almost since the series began.

We have to avoid professional myopia. Motorsport is an entertainment form in competition with other sports. We have to be careful that football doesn’t take it all.

Some non-automotive advertisers are hard to convince to embrace the motorsport environment, for reasons I mentioned earlier, but also because some think motorsport needs a green revolution. If this trend continues, monetising motorsport will become difficult – and most motorsports will end up on special interest channels rather than the strong TV stations they’re on at the moment.

Was that a dig at Motors TV?

Making F1 circuits more fan-friendly

Yas Marina Circuit CEO Richard Cregan

Yas Marina Circuit CEO Richard Cregan

Here’s the good news: circuit owners have finally realised that they need to work a lot harder to provide fans with a worthwhile experience. And the bad? Inevitably, some of them see it as a means of squeezing your wallets harder.

Speaking at the Motor Sport Business Forum in Monaco, Nürburgring CEO Walter Kafitz told delegates:

“Circuits are part of the entertainment business, not just part of the sports business. Unlike in, say, football, people stay at a circuit all day – or all weekend. We have to keep them entertained. If you add value then you can demand more for the ticket.”

Bearing in mind that he was speaking in his second language, we shouldn’t read too strident a meaning into the use of that word ‘demand’. But only this week, the joy of many UK-based fans at the announcement from Silverstone turned to dismay when they contemplated the outrageous price of tickets. To get a family through the gates will cost hundreds of pounds.

It doesn’t have to be this way. For the model of a family friendly circuit, look to Abu Dhabi. The stakeholders in the grand prix – chiefly Aldar, the construction company, and Mubadala, the sovereign wealth fund (which also owns a stake in Ferrari) – planned the new circuit as a family entertainment venue that would offer a rich experience over the whole weekend. They did this because they knew they were bringing the sport to an audience that was entirely unfamiliar with F1.

Thus they built grandstands with a fairly conservative capacity, but specified that they could be easily expanded in future. They invested in educating their staff and their families about Formula 1. They invested in proper transport links, and built shopping malls and other attractions in the local area. The entire project was underpinned by knowledge of and respect for their demographic.

The upshot was a successful event that sold out easily and generated excellent feedback in a survey of public attendees and F1 workers. Compare and contrast with the soul-sucking grimness of other circuits that have been thrown together in the middle of nowhere and left to rot. I remember being at the Turkish GP in 2008 and quipping during the drivers’ parade that it would be quicker to introduce the crowd to the drivers rather than the other way around.

Richard Cregan, CEO of the Yas Marina circuit, said:

It’s about entertainment. It’s all about families, about giving every individual a positive experience – not just at the circuit but in the city itself. I don’t believe that you will have customer loyalty unless you go beyond the event. We’re lucky in that we’re working with organisations like ADTA [Abu Dhabi Tourist Authority] and Mubadala, who are helping to create that environment.

Silverstone appears to be in safe hands; Populous, the architectural consultancy charged with altering the circuit, also transformed the Millennium Dome into the O2. John Rhodes, a senior associate at Populous, described how they transformed the unloved white elephant on the Greenwich peninsula into a successful entertainment venue.

Initially we were looking to get about a million people a year to come to the O2. At the moment it’s about six million. The essence is that people go there to the event but then hang around afterwards. You have to create a destination that will encourage people to spend time there, regardless of whether there is a motorsport activity going on.

Maybe so – but someone’s got to pay for it. And it may as well be you, clearly…

Is Bernie holding Formula 1 back?

Having listened to what the delegates in the first session at the Motor Sport Business Forum had to say about broadcast rights in the new media age, I thought I’d set the cat loose among the pigeons. So, when Chairman Allen invited questions from the floor, I asked:

Given what was said earlier about the broadcast rights being based on a model that’s at least 15 years old, do you think that Formula 1’s rights holder is holding back the sport by clinging on to this outdated model?

I fully expected an epidemic of fence-sitting, but the responses were very interesting. Neville Wheeler of Cisco said:

The pace of change in the internet in general is so fast that unless you’re prepared to break away from the shackles of the old way of doing things, you’re rapidly left behind. You will very quickly find that the people who are passionate fans will seek out and access the content in one way or another.

The smart organisations are trying to find a way of monetising those rights, rather than trying to create a walled garden to protect them as long as possible. We have to get to a point where the audience immersion, social media and associated technologies are a key component of the way motorsport – and sport in general – is delivered to the global audience.

I like the ‘walled garden’ analogy. It speaks to everyone who has tried to access a territory-locked live feed or put up a montage of racing footage on YouTube. FOM has a marketing department of 12 and half of them must be lawyers; one probably even has ‘YouTube Grinch’ in his or her job title.

Gérard Lopez from Mangrove Capital Partners said:

To most people, the so-called MTV generation is the modern generation. To us it’s not – it’s old-fashioned. People don’t buy music any more. Kids don’t watch television as much as they used to. People consume media in a different way. Even some video game platforms are being forced out of the market by on-line gaming. Rights holders have to touch their audiences differently.

It doesn’t make sense to try to charge people for something that they will figure out how to get for free. F1 will be available on the internet and you need to be prepared for that. The challenge is not in deciding what you give away for free but in deciding what sort of value you’re going to provide on top of that – elements that people are actually willing to pay for.

New Lotus F1 boss Tony Fernandes said:

I came from the music business. I left that business because it didn’t want to embrace the internet. I told them [Time Warner] that if they didn’t embrace it, the music industry would be destroyed. They were more concerned with EBEYDL – Earnings Before Everything You Don’t Like – calling it ‘cashflow’. I quit that day.

Social media is a fantastic way of reaching an audience and keeping them excited on a day-to-day basis. There’s a massive opportunity. But whatever you do, it has to be accessible and reasonably priced. There’s a fantastic app for the iPhone that keeps you informed about timings on a race weekend, but it’s pricey. I think F1 has to look at that.

Everyone I’ve spoken to has been enormously impressed by Tony Fernandes. He seems to be exactly the kind of driven, entrepreneurial, forward-thinking businessman F1 needs, and not a flim-flam man or a Walter Mitty type.

The next panel was about sponsor value, and one or two of the representatives echoed the sentiment that FOM needs to take a more proactive approach to marketing the sport – but more about that in a separate post.