19/12/2010
NEWS STORY
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Formula One's boss Bernie Ecclestone has had his fair share of attacks to deal with recently. First he was knocked unconscious in a mugging and then Ferrari president Luca di Montezemolo claimed, yet again, that the teams will start a rival series if they don't get more money from the sport. Now he is on the receiving end of maybe the most stinging attack of them all and, perhaps surprisingly, it is printed in the pages of Ecclestone's biography.
As seasoned Pitpass readers will know, two biographies of Ecclestone have recently been written. One is authored by former Panorama reporter Tom Bower, who has a reputation for digging up secrets on billionaire businessmen, whilst the other comes from Susan Watkins, wife of F1's former medical chief Sid. Watkins has the head start since her book was released last week whereas Bower's tome will not be out until February at the earliest.
Watkins doesn't just have time on her side. She spent nine years writing her book and it is the most comprehensive analysis of Ecclestone's history containing such minute details as a picture of the house where he was born and an interview with his first business partner.
Getting this kind of access was no mean feat and Watkins wrote her book in close collaboration with Ecclestone. Bearing this in mind, it isn't the place where you might expect to find stinging criticism of him. However, that would be counting Ecclestone out and it is never prudent to do that. He knows only too well the publicity that can be generated by shock tactics and there is no doubt that this latest revelation is shocking.
Readers will see from the credits in the book that it was proof-read by Pitpass' business editor Chris Sylt and he has spent the past four months poring over the text to pick out the most significant news stories. One stuck out head and shoulders above the rest and it has come to light today courtesy of an article he has written in the Express.
In a scathing side-swipe, Dennis claims in Watkins' book that Ecclestone stole the rights to F1 from the teams. Given that F1 generates over £800m in annual revenue this is no trivial allegation.
The background to the claim stretches all the way back to the origins of modern F1. Before Ecclestone worked his magic on the sport broadcasters were wary of televising it because races could be cancelled at the last minute if not enough teams showed up. Ecclestone negotiated deals for them as the president of the Formula One Constructors' Association (FOCA) a body which comprised all the teams. His master-stroke was getting the teams to sign a contract in 1981, known as the Concorde Agreement, committing them to race. He took this to broadcasters and F1's television coverage accelerated.
The sport's rights are ultimately owned by F1's governing body the Federation Internationale de l'Automobile (FIA) but it leased them to FOCA in each draft of the Concorde until 1997. In turn, FOCA allowed Ecclestone's company Formula One Promotions and Administration (FOPA), to manage the rights.
TV revenues were split 47% to the F1 teams, 30% to the FIA and 23% to FOPA. Promoters' fees were kept by FOPA, which also paid prize money to the teams.
Ayrton Senna's death in 1994 sent interest in F1 sky-rocketing and in 1996 Ecclestone became the world's highest-paid director taking a £54m salary from FOPA. The following year he planned to get an even bigger pay-out from a £1.5bn flotation of F1 on the London Stock Exchange but faced the hurdle that FOCA's name, not his, was on the contracts for the rights.
Ecclestone swerved around this hurdle when the FIA handed the F1 rights directly to his other key business, Formula One Management (FOM) for 14 years from 1997 for just £6.3m per year. The teams' share of the spoils remained 47% of the TV rights fees with FOM retaining 53% as well as 100% of the revenue from corporate hospitality and trackside advertising.
This manoeuvre side-stepped FOCA and Dennis says "Bernie effectively stole Formula 1 from us. He stole it by concealing from the teams the significant increases that were coming to them as a result of better television contracts. He used this commercial benefit to persuade the teams to accept a contract that eliminated them from the passing of rights as had previously existed."
Dennis adds; "The way [Ecclestone] swerved the situation, I mean some people would say it was brilliant, but in essence it was pretty deceitful because the teams were trying to say 'hold on Bernie we own these rights.'"
Ecclestone puts this down to sour grapes and says in the book that "it's only when things started to look good and I invested the money and it started to work that they thought maybe they should have done it." Speaking to Sylt on Friday evening he added "if Ron really believed that I stole F1 then he should have called the police."
The teams now get 50% of F1's profits and this share came to £336m last year. Dennis admits that the revenue the teams received from the commercial rights has made "everybody" extremely rich but, despite this, he vehemently opposed the FIA swapping FOCA for Ecclestone's company as F1's rights holder. In defiance, McLaren, along with Williams and Tyrrell, refused to sign a new Concorde in 1997. It slowed down Ecclestone's flotation plan and a European Commission anti-competition investigation in 1999 put the brakes on it.
Ecclestone's immediate solution was taking out a £875m bond secured on F1's future revenues. Getting the teams to sign the Concorde was still crucial to this and they were tempted by being offered shares in F1 if it floats in future. As part of the process of appeasing the EC in 2000 the FIA agreed to hand FOM the F1 rights for 100 years however a flotation has not followed. Ecclestone recently ruled this out telling Sylt in September that "there's no way I would sit in front of a load of shareholders. It wouldn't float under me."
Instead of floating F1, Ecclestone has banked £1.6bn for his family trust from selling stakes in FOM's parent company SLEC four times. He now holds a 5.3% stake in the business with the majority owned by private equity firm CVC which paid £990m for it in 2006.
"Everybody I know who has ever had any dealings with Bernie feels that, at the end of the day, you've been taken to a point beyond what I would call the comfort zone. When you reflect on a deal with Bernie you feel that he's managed to squeeze that extra five per cent out of you to create the rub but you never feel that warmth of a fair deal," says Dennis.
He adds "I wish he'd be a little more appreciative of the extensive contribution that all the teams have made to building Formula 1...He's always done a wonderful job of orchestrating but I don't think he's ever appreciated, properly, that a great conductor can only be there if he has great musicians, and I think the role of the teams has been that of musicians."