To judge by some people's reaction you would have thought that the purchase of Formula One shares by Liberty Media was akin to the reappearance of Zeus on Olympus.
First of all, Liberty has not bought a controlling interest, CVC Capital Partners have been holders of the largest block of shares, but that has been just 35.5 per-cent of the total issue. Their control depended on the shares owned by Bernie Ecclestone himself and by Bambino Holdings Ltd, the trust fund set up for his daughters.
The sale to Liberty Media has been welcomed mainly because Liberty is not CVC which has used F1 as a milch cow while putting back not a penny. It is an equity fund and that is how they work. It exists to make money for its investors and to criticise CVC is like criticising a crocodile for doing what crocs do.
CVC took a gamble and it has paid handsomely. Before CVC, two German media companies, EM.TV and Kirch, also gambled on F1 and they collapsed. As a result, three banks found themselves holding shares they did not necessarily want. They were Bayern LB, Goldman Sachs and Lehman Brothers. CVC's investment was not a sure thing.
Remember Lehman Brothers? It was a bank staffed by amazingly clever people who still absorbed toxic sub-prime mortgages. Lehman Brothers was 'too big to be allowed to fail', yet it crashed and most of us were hit in the wallet.
Liberty Media is not a charity, it hopes to see a return on its US$ 4.4 billion investment. So far we have had some leaks from the company, none of which have been a firm statement of policy, they have all been indications of wishes.
One wish is to increase the number of races. If they are paid more money, teams could cope. Before testing was restricted, they ran separate test teams with their own personnel, fleet of transport, and all the rest. What bothers me is that more races could mean a dilution of interest.
Every sport has its showcase events. Tennis professionals play in many tournaments, but only four stand out. Formula One is presented as the pinnacle of motor racing, but already we have twenty-one races. The old adage in show biz is to leave the stage with the audience wanting more.
Liberty sees profit in gambling. You can already place bets on Formula One on line or, in some countries, with a high street bookie. Not even Bernie has worked out how to get a share of an existing practice.
It has been said that Liberty wants more races in America. Since FOCA was formed there have been Grands Prix at Watkins Glen, Long Beach, Las Vegas, Dallas, Detroit, Phoenix, Indianapolis and Austin. At present. Austin seems a stayer, but then it does receive support from the State of Texas.
To hold a race, you need an organiser who does not expect to lose money. Long Beach was a well-liked venue, but the financial demands of FOCA (Bernie) saw it switch to CART. CVC has received criticism for pricing some races out of contention, but it has actually been Bernie Ecclestone over many years.
Turkey, India and South Korea have all build circuits which have failed. France, which invented Grand Prix racing, has not held one since 2008. Germany is reduced to holding a Grand Prix every other year, yet it is one of the great motor racing nations. Financially, Silverstone is in a poor state, yet most F1 teams are located nearby. Montreal, Monza and Spa have all faced threats yet they are among the most popular circuits.
We speak here of motor racing nations, not the lottery winners who found themselves sitting on oil which they needed Western expertise to develop since herding goats and trading slaves is no substitute for science and engineering. Cash-rich tin pot nations have been persuaded that holding a Grand Prix will bring them prestige on the international stage. The trouble is that their governments must underwrite the inevitable losses since the cost of holding a Grand Prix increases year on year.
In the developed world, racing exists at all levels and in many forms: dragsters, karts, banger racing, you name it. I have even seen six double decker buses race on a quarter-mile oval. Developed countries have grassroots racing and so produce those essential people, the marshals. Anything that has no roots, withers and dies.
It was not CVC who priced some races out of reach, it was Bernie because, without his shares, CVC did not have control. It was those shares which saw him ride media storms like a positive reference to Adolf Hitler and, the irony, his buying his way out of charges of bribery while a co-accused is serving eight years. It was not just his expertise that saw him safe, it was those shares.
The arithmetic is simple. CVC is selling its stake, which is 35.5 percent. A little over a third is not a majority. CVC has never, by itself, had a controlling interest and Liberty Media is not buying a controlling interest.
I cannot see Liberty coming up with a new plan that will both give a return on their US$4.4 billion investment, benefit the teams, alleviate the distress of traditional circuits, and make Formula One more popular, when the television audience in some key markets is shrinking.
CVC has reaped massive returns on its stake. Its investment has been called the shrewdest that has ever been made by an equity fund. So I wonder why they wanted to sell. You do not sell if the future looks sunny. All CVC has had to do is count the money, yet suddenly it has cold feet. If you had a machine that printed bank notes, would you want to sell it?
Liberty began sniffing around in 2014, but all such companies do that, all the time. In fact, it was one of several potential buyers. My guess is that Bernie planted the idea that a thrusting outfit like Liberty Media could achieve things that CVC could not, even though CVC had been steered by Bernie.
From Liberty Media we have had all kinds of optimistic noises and some people have grasped them as though they were tangible proposals that are achievable. Liberty has said that teams should be able to buy shares, but the word is 'buy', not 'receive'.
There has been resentment over CVC milking money from Formula One so any alternative looks attractive. CVC was able to do that because of the Ecclestone shares and Bernie has not sold them. His shares are what gives Liberty Media a controlling interest, the other minority shareholders being happy to go along because he has delivered on their investment.
It has been Bernie who has put traditional races under threat while attracting the lottery winners. It has been Bernie who has upped the cost of running a Grand Prix year on year, squeezing both the organisers and trackside fans, the regular people who are not the beneficiaries of corporate hospitality.
Bernie has long said that he advocated free-to-view terrestrial TV coverage of F1. In Britain, that went out of the window when Sky stepped in. The background of Liberty Media is cable television, which is pay-to-view.
The way the transfer of shares has been greeted by some reminds me of Stalinist Russia. Many a poor soul being transferred to a labour camp in Siberia was convinced that Stalin knew nothing about the gulags. He couldn't know. Evil men were doing it behind his back, because if 'Uncle Joe' did know, he would stop the misery.
I will wait to see what Liberty Media actually achieves. In the meantime, I may revise my belief in Santa Claus.
Mike Lawrence.
Learn more about Mike and check out his previous features, here
sign in