The Formula 1 Takeover – News Corporation in Pole Position?

Question: What does Formula 1 have in common with MySpace, 20th Century Fox, Harper Collins and The Sun? Answer: Rupert Murdoch. The CEO of News Corporation has confirmed that he has now got his sights set on F1 – and a lot of fans aren’t happy.

The commercial rights to Formula 1 are currently in the hands of private equity firm ‘CVC Capital Partners’ and they have insisted that the sport isn’t for sale. But rumours of a possible takeover have been flying ever since stories first broke on Sky News and The Times (both controlled by Murdoch as well), and on Tuesday News Corp confirmed that they are in the early stages of a takeover.

Why would this be so bad? Well, one possibility is that the move could take F1 one step closer to Sky Sports. Fine if you’ve already got Sky, of course, but for those of us who don’t then we’ll have a rather expensive price to pay to watch F1. At the moment there is one major hurdle in News Corp’s way: the ‘Concorde Agreement’ (which binds together the teams, Bernie Ecclestone, the FIA and CVC) has a clause that states that the UK has to broadcast F1 on a free-to-air channel (i.e. the BBC, not Sky). However, the Concorde Agreement runs out next year and so there are lots of behind-the-scenes talks about whether changes should be made when it is renewed.

The next few years are going to see a lot of changes in Formula 1. Bernie Ecclestone will surely retire at some point (he’s already 80). CVC will also eventually move on and sell the keys to the sport, and when this happens News Corp is keen to swoop in and ‘revolutionise’ the sport – or perhaps revolutionise the way it is broadcast. The BBC only has broadcasting rights for F1 until 2013 and its future beyond that looks very uncertain, especially since the corporation is already reviewing and cutting its sports coverage in the face of squeezes. The F1 teams are struggling financially too. A change in the Concorde Agreement could provide them with a short-term dose of some much needed cash.

But all the speculation about having F1 on Sky currently seems very unlikely, simply because it would be so damaging to the sport. F1 is a business, and that business relies on big sponsorship deals, which rely on huge audience figures, which rely on having the sport on the Beeb, not Sky. If F1 moved to Sky, I would pay the extra money to watch it. But millions of other viewers won’t. Since moving back to the BBC, the high quality and advert-free coverage has been very popular and the viewing figures have been rising and rising. If the BBC lost the sport, the viewing figures would fall again. And since the sport runs on the support of the fans, this would be bad news indeed.

Naturally News Corp denies that Sky is the motivation behind the bid at all. But if it is, then they may find their bid blocked in the same way their bid to buy Manchester United was blocked in 1998 (due to Sky’s dominant broadcasting). Even if the Concorde Agreement is changed, which is unlikely, they may still face these kind of hurdles.

Aside from the broadcasting complications aside, News Corp is in a strong position. Many teams believe that CVC isn’t doing enough to invest in the sport or allow it to move with the times. Ferrari team principal Stefano Domenicali said: “F1 must speak [young people’s] language, use their technologies, internet, tablets, social forums, and remain comprehensible for the audience. F1 is interesting for Ferrari only if these points are taken into consideration.” Ferrari may be particularly keen for CVC to sell to News Corp because their bid is speculated to be in collaboration with Italian investment company EXOR, which holds a significant investment in Ferrari’s parent company Fiat.

However, Ferrari isn’t the only unhappy team. Most teams are disgruntled that CVC takes half of the sport’s profits but returns very little investment. So there is another option for an F1 takeover which the teams are just about to start discussing: the teams might bid to own the commercial rights themselves. All they have to do is put aside all their historic squabbles and see if they can drum up a spare couple of billion pounds or so.

Fiona Crosby

4 Comments on this post.
  • BP
    15 May 2011 at 21:39
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    I’m lost – in the US F-! is on Speed, isn’t that owned by Murdoch/FOX?

  • DaveT
    16 May 2011 at 05:36
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    When these large organisations take over & subject F1 to ppv, then I like thousands of others will not bother to watch it.

  • Fiona
    16 May 2011 at 18:09
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    Hi BP, you’re right – in America F1 is on Speed which is owned by News Corp. Can’t pretend I’m an expert, but I think non-commercial channels are much smaller in the US… so the free-to-air clause isn’t applicable (as it is in the UK and most other major countries). So I’m guessing F1 was sold to Speed simply because it gains a bigger audience than it would on any ‘free’ channel.

  • Karen
    17 May 2011 at 10:50
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    The problem News Corp’ have is that …

    1. CVC are not currently interested in selling, as shown by the turning down of the Mubadala offer.

    2. The FIA have a veto on any change in ownership, and CVC have first refusal on any sale of the minority shares.

    3. The EU would use Merger Regulation 139/2004, to investigate any conflict of interest, and judging by past rulings against News Corp’, a take-over would be rejected.

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