25/06/2013
FEATURE BY TONY PURNELL
Step Four: Making F1 a sport rather than a business
In this article I'm going to ask three questions of the reader. If the answer to each is 'yes' then I would argue that the only solution is a set of financial regulations (aka a budget cap) administered by the FIA or any future regulators. At the heart of this is a the desire to: (1) Make the sport attractive to multi-national sponsors by ridding any association with sleazy financial dealings or individuals: (2) allowing each team an environment to present a realistic case that they can be successful and not forever in midfield or at the back; (3) make formula one the ultimate sport whereby a large team of people all with specialist skills compete head to head with others at the top of their game on a level and fair playing field.
One: Financing the sport
"Grand Dad what did you do for a job?"
"Well son I started out working for an industry that sold drugs, called cigarettes, (you've learnt about these in history lessons), that were addictive and led to an early death. Then the government put the heat on those guys. The tobacco companies left the scene and, for some of us, no one was really sure where the salaries came from. There was more than the odd rumour that organized crime laundered its money in the industry. Certainly the big boss was always about to be tried for some highly questionable dealings, but always seemed to end up walking away."
"Coo, so you were a gangster? But what did you actually do?"
"Oh, I worked in Formula One."
Well that's a highly cynical view of most of my colleagues' careers, but unfortunately it has a shade of truth in it. What drives Formula One to take any sort of dirty money? Simple, everyone involved wants to win and it's quite clear that money equals results, just like the English Premier League today.
The way to stop this happening is to enable the sport to be financed entirely by legitimate sources without recourse to black money and turn its back on any kind of corruption. This is achieved by making the market buoyant for sponsors such that this is an avenue that simply doesn't have to be taken.
Question one for readers: Do you want to support a sport that is entirely financed by completely legitimate sources?
If the answer is yes, then I think it self-evident that operating teams within a budget, that can be readily obtained from a buoyant market, removes the motivation to take money from questionable source. This is a tad chicken and egg as any association with sleaze drives the legitimate away, so clearly the regulators need a set of financial regulations that target money laundering of any kind such that a long period of sleaze free operation results. Eventually proper sponsors will no longer worry on this point.
Two: A Level Playing Field
What is sport? It's a tricky one to define. In its highest form expressions like 'fair rules', 'a level playing field', 'highest, longest, fastest', all come to mind. We all know and accept that sport needs regulation. We accept this because sport unleashes the deepest emotions, and without regulation things go astray. However already I've stated a conflict as 'a level playing field' and 'highest, longest, fastest' are not harmonious attributes. Easy example – doping, if you want Usain Bolt to go even faster get the best drugs the pharmaceutical industry can supply.
This is causing real issues throughout the world of sport. The English Premier League is a prime example. Hitherto it has been driven by an ethos of win-at-all-costs, just like Formula One. Many feel it has become perverse, players move from club to club for fees and salaries that border on the bonkers. The top teams are pretty much pseudo-monopolies yet often have huge debt. The bottom teams are also loss making and the general standard skewed away from a steady built-in professionalism from grass roots to Premier League towards a massively polarized affair where the handful of big teams run at biblical cost and the rest struggle to survive. The notion of running 'professionally' i.e. as a proper business has rather been lost, to suggest involvement on rational business terms meets with ridicule (American businessmen George Gillett and Tom Hicks were chased away from Liverpool for the sin of not losing enough money per year on their investment; Arsene Wenger constantly gets criticized for not spending enough and worrying about balancing the books; even Manchester United, all conquering maybe, but with a debt that would make most business leaders uncomfortable; Chelsea sack a manager for the sin of being third and Manchester City for the sin of being second; the players and their agents are allowed to push the manager around in a manner that no professional business would ever tolerate.) Now I state all this because the analogy to Formula One is obvious.
Rather against my case, both succeed in producing a product that is 'highest, fastest' with little care of 'level playing field'. Money counts more than any other factor in the achievement of success and the public seems to lap it all up without a care. All that really matters is that there is a perceived fight among two or three teams and the purpose of the other teams is really to make up the numbers and provide the odd upset, but no more.
Is there another way? Look to America the most business orientated and capitalistic of nations. A quick scan of their champions in football (NFL), National Hockley League (NHL) and basketball (NBA), all top sports, shows great diversity in winners. All have salary caps. The exception is major league baseball, which has a 'luxury tax' designed to curtail excess spending.
Additionally and very importantly in America there is the draft system whereby the poorest performing teams have first pick on the best new players. The point here is that they are all implementing business rules i.e. financial regulation. The driving rational is to have a whole League of successful businesses. It's not perfect by a long chalk, but their respect financial regulation efforts are a foot in the door and generally being built on rather than torn down.
Well so be it, rules to prevent cartels or monopolies and to encourage a healthy league of teams, or no rules and a war mentality (winner takes all and the losers sent to hell)? I think few would argue that true sport has more noble aspiration.
I've worked both in business and in sport and the tone of each is set by the regulations. In business fair play is an aspiration of the State – cartels, monopolies are certainly not allowed, and in sport the regulators set the rules for fair play. Today in the Premier League and in Formula One a monopoly like situation is accepted and approved of by their respective regulators. This is all understandable from a historical perspective but I believe this is wrong and each sport will live to regret not moving earlier and more effectively.
Question two: Should there be financial rules aimed at a healthier business environment for the majority of the field, and the prevention of monopoly behaviour?
The only solution here is a budget cap like set of regulations, call it the Resource Restriction Agreement, call it what you will, but essentially a spirit of regulation which is analogous to the technical regulations: All bodywork must fit in the maximum dimensions allowed, but it's shape is free save for some practical limitations = All money spent must fit in the budget cap allowed, but the shape of the spend is free save for some practical limitations. It is of course essential that the 'cap' is set at a level such that the majority of teams (say 70%) have no difficulty getting the funds from a combination of sponsors and FOM appearance and prize money.
A case must be made to sponsors that asks for a reasonable and in terms of value for money, attractive amount, of money coupled with an argument that this team is not inherently disadvantaged by running on a fraction of the budget of a real championship contender. This gives a very fair competition and it turns Formula One into far more of a sport.
Three: Regulation or Self-Regulation
"Well children" says the governor of the nursery, "We all know that you mustn't snatch each other's sweets, hit each other, make a mess, or pull each other's hair. Agreed?"
"Yes Miss Fia"
"Now we shall trust you to play nicely by yourselves. I'll not even take an interest because it's your nursery and you children are the best folk to look after it."
OR
"Do what the teachers says, obey the rules and then and only then will you have a happy time here."
Which is going to work? Doh?
In Formula One people cheat, it's a fact and while past performance is not a reliable indicator of the future, well, in life people cheat and certainly push into grey areas. Ask the tax authorities; attend the magistrate's court; look at doping in sport. It's human nature. Self-regulation is nonsense and at heart everyone knows it. It only comes about because of clever political manoeuvring for self-interest. The lever is often for folks to express doubt over the probity of the regulation body and to convince others that 'we can do it ourselves'. An independent and powerful regulator must police any regulation, or there is no realistic prospect of success. This is particularly true of Formula One, whose history of ethics is somewhat colourful.
Question three: If financial regulation is a good idea, should the teams be trusted to implement and police the rules themselves?
I'll leave the reader to answer that without further comment.
So to finish off think what a fantastically challenging competition Formula One would be if each team had the same amount of fuel (money) to burn each year. Formula One is huge so it would still very much be the largest amount of any motorsport. Reputations would grow and shrink based on merit and competence, never devalued by the thought 'well how clever is it when you can continually buy the best of everything and, if that wasn't enough, buy your way out of any mistakes along the way?'
In my heart I know that this utopian view is unlikely to come about in the short term, but the ball started rolling with the Resource Restriction Agreement and the teams are hurting badly at the moment financially. Once there's a crack in the door it can always be opened.
My next article will look at the mechanics of financial regulation and argue that while there's no doubt its difficult, it is a real possibility.
To learn more about Tony and check out his previous features, click here