30/06/2011
NEWS STORY
James Murdoch, News Corp's deputy chief operating officer, and who is believed to be a racing fan, doesn't actually appear to know who runs F1.
Last month Rupert Murdoch's News Corporation media empire announced that it was considering whether to bid for Formula One with its business partner the Exor investment fund. Although the duo said that "there can be no certainty that this will lead to an approach to Formula One's current owners," the announcement led to stories suggesting that News Corp had as good as already bought the sport. In fact News Corp still hasn't made a bid for F1 let alone got agreement to buy it from the sport's current owner private equity firm CVC.
News Corp's interest in buying F1 was reportedly driven by Rupert's son James Murdoch who is the company's deputy chief operating officer and who is believed to be a racing fan. Pitpass has explained at length the ulterior motives News Corp and Exor could have for saying they would like to buy F1. However, even if News Corp really did want to launch a majority takeover of the sport, there are many reasons why it will never happen. At the top of the list are the regulatory hurdles. Then comes possible conflict with F1's own agreements which require free-to-air television coverage.
As Pitpass has also reported, now that 17 of F1's circuits are unified, any buyer would need their consent too. The circuits have already threatened to leave F1 over the new engine regulations for 2014. Even if this is resolved they could still threaten to leave if their hosting fees aren't cut and this would put a new owner right under their thumb.
If the 17 circuits pulled out it would leave F1 with a maximum choice of only eight to race on since they are the only others currently approved for the sport by its governing body the FIA. This would reduce F1's revenue by around 40% so the circuits' card is a strong one.
Likewise, the teams are currently negotiating a new contract to race in F1 from 2013 and if they don't sign one there is the risk that they could pull out at any time. There is good reason why they might not want to race in a News Corp/Exor-owned F1. In a nutshell, Exor ultimately owns a stake in Ferrari so this could amplify the frequent concerns that the Italian team is favourably treated in F1.
As Pitpass has also reported an investment bank which works with News Corp has said that the media company bizarrely thought that the involvement of Exor would add credibility to its position. If true this would show just how little News Corp understands about F1 and that's just the start.
According to the Evening Standard, at a recent advertising conference in Cannes one of F1's independent non-executive directors Sir Martin Sorrell, the chief executive of advertising firm WPP, asked fellow speaker James Murdoch if he is still interested in buying F1. Murdoch's reply was "you're the chairman of Formula 1 - you can't ask me that," to which Sorrell pointed out he is only a non-executive director. You would have thought that if News Corp really is serious about buying F1 its due diligence would have at least revealed the job titles of its directors.
This realisation may have come as a disappointment to Sorrell who has had an involvement with F1 for over 40 years. It stretches way back to when he handled Sir Jackie Stewart's management account at talent agency IMG in 1969, the year that the Scot won the first of his three world championship titles.
In the wake of the initial reports about News Corp's phantom bid Sorrell said "I see no harm whatsoever in a pay-TV company investing in or owning Formula One... But (I make) those comments as a WPP employee and not as a Formula One director." This view seems to clash with those of the F1 teams which command high sponsorship values due to F1's wide audience by being on free-to-air TV.
However, with his WPP hat on, it is easy to understand why Sorrell could be happy for News Corp to buy F1. The two companies are not unconnected and in November 2009 WPP struck a data-sharing deal with News Corp.
Unlike F1's other independent non-executive director, Nestlé chairman Peter Brabeck-Letmathe, Sorrell has repeatedly spoken out against F1's boss Bernie Ecclestone who reportedly may stand down if News Corp takes over the sport.
First, in 2009 Sorrell said "any other CEO in any other business would be gone" when Ecclestone was not fired for making a controversial comment that Hitler could "get things done." Ecclestone later said that Sorrell "is not in a position to get rid of me in any shape or form," and it seems he was right. Despite Sorrell's outburst, Ecclestone stayed in F1's driving seat.
Next, when former Renault F1 boss Flavio Briatore was banned for life from working in F1 over the allegation that he forced driver Nelson Piquet Jr to crash, Sorrell challenged Ecclestone's view that "even murderers don't get life these days." In response Sorrell said "first we had 'Hitler did good' and now we have 'cheating is acceptable'. It's another example, I'm afraid, of Bernie being totally out of touch with reality." Despite Sorrell's outburst, the FIA later overturned its own ruling against Briatore.
Given Murdoch's comments to Sorrell it doesn't look like we will be seeing whether he got it right the third time with his views on a News Corp takeover of F1.