As an international sport encapturing the pinnacle of competition and glamour Formula One has from the 1970s onward become the "sport of 'new' kings". A highly visible, commercially orientated realm today physically, tele-visually & cyber-spacially spread across the globe to an audience population of 600 million plus that remain crucial to the fortunes of the F1 kingdom, a kingdom which is essentially ruled by a triumverate that faces external and internal challenges - the FIA (the sports official body), the Constructors & latterly Auto-Companies & the commercial rights holder - presently FOH (Formula One Holdings).
Long ago the sport's internal tension was primarily between the FIA and the race car constructors over the set and re-set technical / specificational 'formula' the race vehicles had to abide by. And whilst the sport was essentially visually limited to circuit attenders and the sport's devotees that tension was part and parcel of the evolving face of an intrinsically 'techie' motor-sport; pitting technical innovation against the boundaries and loopholes of the rules - a theme that ran right through to the early 1970s before the advent of media global coverage. From that point onward though the sport, through TV, gained massive popularity and so encouraging corporate sponsorship, initially by cash-rich tobacco firms, and so inevitably the issue of commercial distribution rights
That paradigm shift through the 1970s, which saw the fiscal stakes raised massively, altered the activity's core persona forevermore. Changed from that of a marriage of 'sporting gentlemen' (eg Stirling Moss and Graham Hill) and 'engineering gurus' (eg John Cooper, Jack Brabham & the 'Cosworth' duo) into something far commercially-based, corporately orchestrated and money-charged. So attracting greater interest from the auto-industry's major players who could leverage parts of their large R&D and marketing efforts and budgets to gain competitive technical advantage and promotional visibility amongst the consumers within the mainstream marketplace. The Europeans like Renault, BMW and increasingly FIAT via Ferrari similarly espousing the 1960s US proverb: "Win on Sunday, Sell on Monday"
Integrally stressed engine blocks, ground-effect, suction-fans, turbo-chargers, V10 configurations, layered composites, woven carbon fibre, ABS, active-suspension etc etc all tell the tale of rising innovation and technical budget spend through the 70s, 80s and 90s in bids to increase power, reduce weight and increase controlability; the FIA forever having to catch-up with and re-rule this inventiveness in the name of fair competition and driver safety.
Of course there is the adage that 'racing improves the breed' and race-teams R&D engineers will highlight the 'trickle-down' effect of technology into road-cars, though their is also much counter-weight to the CFO and CEO argument that the technology does not automatically transfer, and very often is developed concurrently by external suppliers adhering to very different 'real-world' performance parameters. Whilst there can be a technical intertwine between F1 and mainstream cars, that relationship is obviously very dependent upon the VM's interdependency with the sport; Ferrari and Renault perhaps being the polar extremes. Even though Renault tries to perceptually reduce that chasm the difference between their respective core products of an F430 and a Megane (& Dacia).
Obviously, the more money available, the more able at massage that connetation. But as is evident today the world at large faces a different interim period over the next 3+ years.
The 5 years of rising fortunes of for strong globalised economy, buoyant corporate earnings in many sector value-chains and the accordant 'feel-good' consumer spend that was seen between 2002-2007 has evaporated before our very eyes as a result of complex and infected financial markets. The viral effect has wiped billions of Dollars, Pounds and Euros from capital and money markets, and wiped millions of off corporate balance sheets as they take the hit of accounting write-downs and plunging asset values. Corporate CFOs, Treasurers and Pension Commitees are doing all they can to mimimise their financial pain, and cost-cutting necessity is perhaps more virulent than ever given the lack of operational liquidity and the need to survive and re-strengthen in future, (let alone for some the potential of hostile take-overs by those with diminished by comparitively stronger positions).
That reality has now finally hit Formula One, with the statement that Honda will be exiting the sport. It is a reality that investment-auto-motives noted some time ago as an obvious consequence and the impact could be potentially huge. It acts as a watershed moment for the sport. The resultant evaporation abundant finance from major sponsorship deals that balooned team R&D and tour caravan size now encourages, indeed necessitates, the need for individual participant frugality and community macro-rational efficiency. The age of simply throwing cash at the problem of finding a micro-second performance advantage has gone.
This is the central message that both the FIA's Max Mosley and FOH's Bernie Ecclestone are vocalising - a rarity to have them singing off the same hymn sheet, and thus indicative of the issue's importance. The FIA acts as the conduit of the new pan-western political will for eco-advacocy and energy-conservation, hence is keen to continue on its path re-set the technical specification 'formula' of F1 to reflect the new eco order.
A time for prescient change.
Change must also be considered on the macro-operational level of the sport. It may now be time to re-assess the present business model and the value-creation it provides for the ruling triumverate (FIA, Race Participants & FOH) and their value-seeking associates. Equally important is the role and say of the high-profile and low-profile Sponsors. High profile are the Corporate Sponsors, best exemplified by Santander or Vodaphone who through FOH's efforts have gained increasing exposure on the race-cars, trackside (often electronic) advertising hoardings and in & around TV camara hotspots and spectator hotspots throughout the circuit itself. Low-profile are the increasing proliferation of State Sponsors - from Istanbul to Beijing - that have invested from their SWF pots in infrastructure and man-power for the good of national pride, profile, tourism, the regional economy and trade relations are increasingly enchanted with F1 as a method of showcasing themselves to the wider world.
Thus, in these changing times investment-auto-motives prompts the sport's major players to not only explore the envelope of the traditional business model and value chain as recognised today, but to also explore the potential for expanding and evolving the very nature of F1 and its international, cross-generational, cross-gender appeal. The 'entertainment' element of the 'sports entertainment' dualism has been growing steadily, but needs to be explored further to further capture that local and global audience's attention and imagination.
This means a philosophical de-construction of what we know the sport to be today, to fully examine each and every component part seeking 'inherent' value release as well the re-construction of the value-chain. Additionally comparison to the plethora of other sports business models that operate across the world, from football to horse-racing, and eventually a overlay of contributive aspects to the mix. And finally a review of the entertainment industry to provide a similar exercise and benefits.
Strategic review of F1 direction for is of course part and parcel of the ever-ongoing triumverate dialogue, and recognise the growing PESTEL and commercial cross-industry 'inter-connectedness' that F1 has displayed in recent years to grow its franchise. This perhaps best seen by the first ever night-race in Singapore taking place this year which aligns to the computer game 'game-play experience' which itself was prompted by the need to tap into a unified global TV audience. Thus the visionaries of F1 has long noted the need for perceptional and inter-actional involvement, and given the evolving the context and backdrop of the sport its evolution on and off the track must be comprehensively considered and well guided.
investment-auto-motives continues to be part of this dialogue to ever stretch and maximise the industrial, entertainment and political value-creation agenda.
