The business of Formula One could be set for a similarly drastic swing. Much more than a trophy and a big check is at stake: the future ownership of the world’s most widely followed auto racing series — and, perhaps, the way in which hundreds of millions of fans watch it on television — is ultimately up for grabs.
The starting gun in this contest was fired this spring when News Corporation, controlled by Rupert Murdoch, and an investment company owned by the Agnelli family of Italy, overlords of the storied Ferrari racing team, expressed interest in taking over Formula One Management, which organizes the races.
Since then, in trackside chats and informal conversations, officials of the two companies have been trying to convince skeptical team owners and other interested parties that they are the best future stewards of Formula One.
People with knowledge of the talks say the pitch goes something like this: News Corporation could do for Formula One what it did for English soccer, which was transformed by an infusion of billions of pounds of television rights fees from a News Corporation pay-television affiliate in Britain. News Corporation’s global reach and considerable financial resources could generate interest in markets where Formula One has lagged, particularly the United States.
Meanwhile, by aligning themselves with the Agnelli company called Exor and Ferrari, the team owners might be able to extract a larger portion of the commercial proceeds of the races, rather than handing over half to the central organization, as they do now.
Still, questions abound. Would team owners agree to part ownership by another team? Would regulators allow Formula One to move from free television, as stipulated in its current operating agreement, to pay-television outlets in Europe and Asia owned by News Corporation? If so, would fans and sponsors stick with the sport?
And perhaps most important, would this marriage of a media company and a sports organization work better than other recent examples, most of which have broken down after failing to deliver the expected benefits?
“I can’t see how a media group could take over without changing fundamentally how the sport is run,” said Nigel Currie, the director of BrandRapport, a sponsorship agency. “Media companies are now one spoke in the wheel of Formula One, but in this case, a media company would become the hub.”
Precedents for media companies owning sports franchises or organizations are not especially encouraging. News Corporation bought the Los Angeles Dodgers in 1998, hoping to generate viewership for its Fox TV network. It sold the team six years later when the hoped-for synergies failed to emerge.
American media companies, like Tribune Company and Disney, have also been bailing out of team ownership. The New York Times Company is trying to sell its stake in the Boston Red Sox.
The hurdles are so high that some analysts say they think News Corporation and Exor do not intend to make an actual bid for Formula One, which is majority-owned by CVC Capital Partners, a private equity firm. Instead, they may be trying to persuade key teams to peel away and create a new race series — a threat that has been dangled several times in the past.
Bernie Ecclestone, the 80-year-old impresario who has been the driving force behind the race series for four decades, said that officials of News Corporation and Exor had not made any formal presentations to CVC or to him.
“It’s a pity they don’t come along and sit down with the people that own the shares,” Ecclestone said. “That conversation hasn’t ever taken place.”
By keeping everyone guessing about their intentions, News Corporation and Exor figure they cannot lose, insiders say. An agreement between the teams and Formula One Management expires next year. If the teams were to break away and set up a new series, the value of CVC’s investment in Formula One, which it bought for about $2.6 billion, would plunge.
Article source: http://www.nytimes.com/2011/06/27/sports/autoracing/maneuvering-to-control-future-of-formula-one.html?partner=rss&emc=rss