By Christopher A. Sawyer
The Virtual Driver

(December 31, 2017) It gets a little tiring reading the European press prattle on about the Americans ruining Formula One. True to form, the establishment looks down on Liberty Media simply because it is an American company, and is predicting all sorts of mayhem should the new owners of the series make substantial changes. Changes like those rumored to the fee and payment structure that, for quite some time now, has generously benefitted Mercedes, Ferrari and Red Bull.

None of these have been enriched as much as has Ferrari; the grande dame of F1, there since the beginning and the reason, its supporters claim, so many fans the world over watch Formula One.

Liberty Media is a relative unknown in motorsports, which makes it difficult to predict exactly what it may do or how it may react when challenged. However, it has dealt with FCA and Ferrari CEO Sergio Marchionne’s threats to leave F1 with a quiescence that suggests it isn’t overly concerned.

Chase Carey, the CEO and executive chairman of the Liberty Media-owned Formula One Group, had no trouble politely showing former chairman Bernie Ecclestone the door, and announcing the need to bring many aspects of the race series up to modern standards. What makes Marchionne think he would cry about Ferrari’s threats?


In an event eerily similar to Apple Computer's famous "1984" commercial, Sergio Marchionne announced Sauber would be sponsored by Alfa Romeo, and run rebadged Ferrari engines. The move gives Marchionne more seats at the table when negotiations begin, and is underlined by Ferrari's threat to start a breakaway race series should it not agree with the post 2020 technical regulations or, more importantly, the payout to teams.

As expected, the F1 media elite derided the new owner’s ideas to make each event more like a Super Bowl in terms of promotion, bring the excitement of Formula One to major city centers, and to increase the competitiveness of the mid-field teams and backmarkers by cutting costs and rethinking the distribution of revenues. Not surprisingly, this last item grabbed the attention of the first-tier teams. And it was helped along by chairman emeritus Ecclestone publicly suggesting that Ferrari’s threats to leave the sport are, at best, hollow.

Taking the bait, Marchionne upped the threat level by claiming that the current rules would allow Ferrari to start a breakaway series without threat of sanction from either the Formula One Group or the series’ sanctioning body, the FIA. Financially, it would be a massive undertaking, and the FIA probably would refuse to sanction an independent series. It’s possible Marchionne’s fellow automakers might not follow Ferrari out the door.

The current engine formula runs through 2020, but Marchionne et. al. have complained bitterly about ideas put forth by former F1 team manager turned Formula One Group Managing Director, Motor Sports, Ross Brawn, to cut costs and make the racing closer from 2021. Inevitably, this led to cries that Formula 1 was about to be “NASCAR-ized” and raised questions about the virtual F1 team Brawn has assembled under the guise of the Formula One Group. The F1 establishment has every right to be worried, for Brawn’s virtual team is classic NASCAR thinking.


In Formula One, this qualifies as close racing. The hybrid engine formula is monstrously expensive, and changes to the tires and aero package have increased speeds, but made passing more rare.

Don’t be surprised if it turns out that Chase Carey is using Ross Brawn and his team of engineers and aerodynamicists much like NASCAR used former Cup crew chief — and one of the sport’s craftiest cheaters — Gary Nelson to police the series. This “fox in the henhouse” made it much more difficult for others to bend the rules, and was instrumental in directing NASCAR’s research and development programs on multiple fronts. For his part, Brawn used a loophole in F1’s rule book to create the double diffuser that would take his eponymous team and driver Jenson Button to their respective world championships.

Now he is in a position to test theories, established ideas and current practices, and determine which gives the greatest return on investment. This information will be used to accurately forecast the amount of money that is necessary to run a competitive team while keeping F1 both relevant and exciting. And that scares the F1 establishment to its very core.

Though the Brawn research team’s initial results may veer a bit too close to spec racing, it’s apparent from the action on the track that the money being spent by F1 teams — multiple hundreds of millions of dollars each for the top teams — is being wasted. For example, Mercedes, which is intent on spending whatever it takes to prove it is the technical master, is reportedly testing a 2018-spec engine with 1,000 horsepower and an unheard of efficiency rating of 50%.


Sauber's Alfa Romeo sponsorship is just one link in Marchioone's chain. Sources in Italy say he is encouraging the Ferrari-powered Haas F1 team to take Maserati sponsorship. In addition to effectively giving Marchionne and Ferrari more clout in negotioations, it also creates potential openings for Ferrari's junior team drivers, and gives any Ferrari-initiated breakaway series three factory teams with which to entice other teams to defect.

Undoubtedly, this will give it dominance through the end of the current engine formula, but at great cost to its competition and the sport itself, with little payback for its cars and trucks. (Less expensive (and technically complex) hybrids and full-electric vehicles will allow it to meet its regulatory obligations at less cost.) Meanwhile Brawn’s investigations should prove that it’s possible to get much of the performance, less power variability — and more sound — at a much lower cost. Nevertheless, both Mercedes and Ferrari are right to fight against Brawn’s suggestion that the layout of the engine and its ancillaries should be standardized to reduce the cost of swapping engine suppliers to smaller teams. That is, indeed, a bridge too far in that it takes too much control out of the hands of the teams.

What is not out of line is reducing the cost of a powertrain for each team (reportedly $20 million or more per year, a price that doesn’t cover the full cost of the package), and encouraging other suppliers to join the circus. Company management and priorities change, as do economic conditions, and this can cause even the most ardent manufacturer to leave the series.

Having a number of powertrain suppliers competing (or waiting in the wings) is a prudent insurance policy against such a situation. If anything, it shows that Liberty Media is focused on the long run health of the series, and not on turning it into an open-wheel version of NASCAR.

Ironically, it is Marchionne himself who is practicing brazen badge engineering. The Ferrari power unit will be rebadged as an Alfa Romeo when it appears next year in the back of Sauber’s cars, and it’s rumored he wants the Ferrari-powered Haas team to accept Maserati sponsorship and engine badging. Not only is it a smart (but cynical) power play to give Ferrari greater power in the coming political battles with the Formula One Group, it also would give Marchionne the power to place Ferrari’s junior team drivers in the team. Should the threatened breakaway series develop, Ferrari could deprive Liberty Media and the Formula One Group of three teams and a number of drivers, causing the series to reconsider. But would Ferrari really leave?

The movement of F1 coverage in the U.S. from NBCSN to ESPN was more than Sean Bratches, the Formula One Group’s Commercial Operations managing director, giving a deal to his former employer. Though NBCSN’s subscriber base of 84 million is just 3 million short of ESPN’s 87 million, the self-described “leader in sports television” charges cable operators $7.21 per subscriber versus NBCSN’s approximately 30 cents per subscriber. And that gives it the financial might to go “over-the-top” and provide streaming and other services to the increasing number of viewers who are “cutting the cord” with their cable providers. It will not be used to finance a return to the old days when the network sent Bob Varsha, David Hobbs and the upturned collar that is John Bisignano to each race, or even be used to underwrite coverage by an announce team located in the U.S.and a reporter in the field as did NBCSN.

ESPN will show Sky Sports’ coverage, much as the Canadian Broadcasting Company used to show the BBC’s race coverage when it was anchored by Murray Walker and James Hunt. As a Detroiter who used to watch Murray and James, I can assure you it’s not a bad thing. Further, the purchase of many Fox network assets (including its stake in Sky) by Disney (ESPN’s parent) only increases the likelihood that a global platform will be created to stream additional Sky-created content. This will be used to increase the number of viewers beyond what currently is possible.

Will Ferrari, much less Mercedes (and any other possible defectors), be able to shoulder the financial burden (or find partners willing to do so) to create a similar broadcast platform? No. And though Marchionne claims Ferrari’s yearly outlay to compete in Formula One is substantial, the truth is quite different. It currently pays little for its participation, and is probably unwilling to turn a net positive into a substantial negative by pursuing creation of a new series. What it (and the rest who are participating in the payment system at its upper reaches) are fighting to preserve is their slice of F1’s financial pie.

Given the unsustainability of these payments given Formula 1’s current cost structure, this is impossible, and the teams know it. The soap opera currently playing out is not a crusade against American ownership and intervention as the European press would have you believe. It is nothing more than a prelude to negotiations.

The Virtual Driver