The feared exodus of sponsors from Formula 1 following the FIA’s vote of confidence in Max Mosley looks unlikely to happen, but the long-term repercussions remain a concern. F1 is home to over 300 brands providing its 10 teams close to £500 million and making up the bulk of their budgets.
It was expected that brands might announce their departure from F1 following a Mosley victory due to the negative impact on the image of the sport following the tabloid sex scandal. This has yet to take place, but whether it affects the sponsors’ appetite to remain in F1 when their deals come up for renegotiation remains to be seen.
“Apart from the media speculation, luckily I have no concrete information that sponsors are considering leaving F1,” said one leading motor sport consultant. Vodafone and Johnnie Walker have said they will stick with McLaren, and Time Warner has said it is staying with Toyota. However, another danger may not be so much sponsors leaving the sport, but new brands being put off from entering.
“This latest episode may justify those sponsors who always had an emotional scepticism towards F1,” said Kolja Spori, chief executive of Grand Prix Group, a leading F1 sponsorship brokerage. He added that since the core benefits of F1’s geographic penetration and annual exposure to an estimated 597 million viewers remained, “it will not affect any decision maker when searching for a global marketing platform”.
Nevertheless, many sponsors may be afraid of speaking out for fear of recriminations. In June the German press quoted a team principal as saying that “many [sponsors] are even threatening to cease their payments if F1 does not solve the problem with Mosley”. The team principal refused to be named.
“The sponsors have been told that it’s better to keep quiet,” said former World Champion Sir Jackie Stewart. An undercurrent of irritation would certainly fit with the view of the commercial consequences of the Mosley scandal as given by F1 supremo Bernie Ecclestone. He recently revealed that: “Since the story broke I have been under enormous pressure from the people who invest in F1 over this issue. They point out that as a chief executive or chief operating officer of a major company they would have gone either immediately or within 24 hours under the same circumstances. They cannot understand why Max has not done the same.”
The biggest risk for sponsors could be that CVC, the private equity firm which owns F1’s commercial rights holder, may decide that the only way to distance itself from Mosley now is to break all ties with the FIA – even if it means launching an entirely new series. This has been mooted in the press and, rather conveniently, Ecclestone’s private business owns the intellectual property to the brands ‘GP1’ and ‘GP3’ as well as ‘GP2’. A new series could have numerous benefits for CVC.
The FIA currently has a veto over a change in ownership of F1’s commercial rights holder which would not apply to a new series outside the governing body. This flexibility would increase the value of CVC’s motor sport investment when it comes to sell. Likewise, the current impasse in getting all parties to sign a new Concorde Agreement (see right) to stay in the sport could be solved. The FIA has so far refused to sign a new contract, whereas CVC and the teams wish to do so for financial security.
Team bosses are wary of any series switch, however, due to the inevitable upheaval. “I don’t think it’s the first option,” said Nick Fry, chief executive of Honda Racing. “We’d prefer to work with the FIA if we can. We wish to see a speedy end to the current instability.”
BMWs team boss Mario Theissen agreed that it is, “now a very critical situation for the FIA – between it and its membership clubs. This does not only affect the FIA, but also external partners like the car industry or motor sport.”
While F1 may not have lost any sponsors yet, some of its core attributes have been damaged and, in the long run, this could limit the surge of new sponsors it has seen in recent years.
“By unveiling every fan’s assumption of excessive F1 lifestyles, Max Mosley has unwantingly (sic) thrown away some of the mystique, the glamour, the sex appeal, the sportsmanship which was F1’s unique selling proposition,” said Spori. “By hanging on, Max makes the story stick – and the badly needed catharsis impossible. In the highly perfectionist and iconic world of F1, the cleansing effect cannot be achieved without a major gesture from Mr Mosley.”
At the moment, that doesn’t seem likely. Christian Sylt and Caroline Reid
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