Fantasy Island

Niki Lauda's "pay to drive" March in 1972. [Photo by Jack Webster]

Niki Lauda’s “pay to drive” March in 1972. [Photo by Jack Webster]

By Jack Webster and Eddie LePine

Formula One is facing an uncertain future, as it is currently shut down due to the Coronavirus Pandemic, as are most professional motorsports across the planet. Races have been canceled or postponed, team’s cash reserves are drying up, paying drivers aren’t paying because they aren’t driving, sponsors are reluctant to provide promised sponsorship money as they themselves are facing an uncertain financial climate, and even auto manufacturers are facing huge losses in their core business – let alone finding the funds for Formula One. Then throw into the mix the astronomical budgets that are currently the norm in Grand Prix racing along with the lack of competition throughout the grid and you have a recipe for disaster. On top of that, like it or not, electric cars are the motorsport of the future and the FIA Formula e series has an exclusive with the FIA for formula car racing with electric cars. That’s right, an exclusive.

Formula One teams just recently agreed to budget caps (the large teams begrudgingly) so that the new budget maximum will be some $145 Million per year per team. $145 Million per year! Oh, the humanity!

Is Formula One just rearranging the deck chairs on the Titanic? As time goes by, that seem like a likely scenario. McLaren just announced they are laying off some 1200 employees, some of whom are directly connected to the racing team. This after signing Daniel Ricciardo to a huge contract and being turned down by the British government for stimulus money. On top of that, they are now trying to get a bank loan ($300 Million+), putting up their company headquarters and their historic race car collection as collateral. Bruce McLaren must be turning over in his grave! Renault as a company is looking possible bankruptcy in the face and may not have money to continue to pour into Formula One. As many as three or four current teams may not be able to financially survive the Coronavirus Pandemic and may disappear from the grid. Just today, Williams Formula One announced that they are looking for a buyer (A little late, don’t you think they should have sold to Lawrence Stroll when they had the chance?). Nissan (Renault’s partner), just announced plant closings, layoffs and a 20% reduction in sales. Who will then be left? Ferrari, Mercedes and Red Bull (hell, even Mercedes is looking to get out and Toto Wolff just announced he is heading out the door). Of course, Racing Point will still be on the grid as long as Lawrence Stroll wants to keep writing huge checks, so perhaps he will buy Williams so he can own two teams.

Everyone in Formula One lives in a bubble. They are totally disconnected from the real world. They are literally on their own Fantasy Island. In the recent past, it would have been Bernie Ecclestone standing on the shore of the island, and instead of saying “Ze plane, Ze plane” as Tattoo did in the TV show, would have been saying “Ze money, Ze money”.

But Bernie is now gone, retired, after making what was perhaps the greatest deal ever in the history of motorsports, selling his controlling interest in CVC, the Formula One rights holder, to the guys at Liberty Media for some $4.6 Billion dollars in 2017. That’s right, $4.6 Billion. Bernie knew that the jig was up, he could see the future, the coming of electric cars, the out of control budgets in a rapidly changing world. He knew it was time to sell it all. Bernie was no dummy, and has been the case throughout his racing life, his timing was perfect.

How did Formula One get to where it is now? What caused the massive increase in spending, the huge increases in personnel, the crazy driver salaries?

Blame the evil weed. Tobacco money. It has been a presence in Formula One racing since 1968 when Colin Chapman accepted sponsorship money from Player’s Tobacco and painted his cars in their Gold Leaf livery. The team was even named Gold Leaf Team Lotus, in deference to the sponsor. Prior to this deal, Formula One cars pretty much ran in their country’s colors, with perhaps an oil company sticker or two.

That Lotus deal started the flow of tobacco money into Formula One (and other racing venues as well). What started as a trickle soon became a flood as the dam holding all that money back burst. The reason the dam burst was the banning of tobacco advertising on television. Player’s saw the writing on the wall before anyone else when they stepped forward to sponsor Lotus in 1968. Britain had just banned television advertising of cigarettes in 1965, but the big one fell in 1970 when the US banned television commercials selling cigarettes, to be followed by France in 1971, Canada in 1972 and other European countries soon thereafter.

So, what happened then? All that tobacco advertising money had to go somewhere and the tobacco companies saw that auto racing, and in particular Formula One racing, had a worldwide audience on television. If tobacco couldn’t advertise directly on television with commercials, they certainly could put their logos and color schemes all over Grand Prix cars and all over driver’s uniforms and helmets. They could even incorporate their name into the official team name, as they did with Marlboro Team McLaren and JPS Team Lotus. Their PR people and attractive girls showed up at the race tracks, passing out sample cigarettes and coupons so you could buy more of their product once you left the race. They had their name on everything related to the race team, from patches and stickers to hats, shirts and jackets. They literally became entwined as part of the DNA of motorsport.

At about the same time, Formula One (and their tobacco sponsors) saw huge growth opportunities by expanding the race schedule outside of traditional venues (Europe, North & South America) to large tobacco consuming regions of the world, like Asia and eventually the Middle East. Follow the money – that was Formula One’s new battle cry.

Formula One, along with other forms of motorsport, quickly developed a taste for and kept inhaling unfiltered tobacco cash (pun intended). Racing was enjoying a fantastic period of growth – both in television exposure and cash provided by tobacco sponsors (or “partners” as they preferred to be called).

Personnel were added as team budgets grew, cars became more sophisticated and technology started to run amok in Formula One. The teams became like teenagers with a no limit credit card in their pockets – the good times would go on forever, wouldn’t they?

The wouldn’t, and they didn’t, but Formula One kept digging their financial hole even deeper. Governments saw through big tobacco’s scheme of addicting more youth to their products and the FIA finally banned tobacco advertising from Formula One by the end of 2006.

But by then, the damage had already been done. The teams had gotten so used to sucking on that unfiltered tobacco money that when that source of easy cash dried up, they continued to smoke something, because budgets keep spiraling out of control.

As budgets continued to skyrocket Formula One thought they could substitute money from high tech companies for the now absent tobacco money. To a degree, that plan was somewhat successful, but all it really did was take the “sport” out of motorsport and Formula One became just a high budget engineering and technology exercise, at the expense of competition and the emotion of the sport. Drivers used to be worshiped as heroes for their actions behind the wheel of a Formula One car (remember Gilles Villeneuve?) but now their input into the final result has diminished their standing as larger than life heroes, for the car and the technology built into it gets too much of the credit for success and the blame for failure.

The lack of competition, the difference between the “haves” and “have nots”, has only grown worse in the past decade. From 2010 to 2013 Sebastien Vettel won the World Championship driving for Red Bull, from 2014 to 2019 Lewis Hamilton won the World Championship every year, with the exception of 2016 when his teammate Nico Rosberg won the title – but they were both driving Mercedes. That’s it. Two teams dominated an entire decade. How Formula One even gets teams to take part in the World Championship (other than Red Bull and Mercedes) amazes us. Other than the two winning teams (and Ferrari), what is everyone else showing up for – just to be seen? Are they there just to fight over the table scraps (points) left uneaten by the top teams?

Here are some interesting numbers for you. In 1965, Jackie Stewart signed his first contract to drive in Formula One. He signed with Brabham to be Graham Hill’s teammate. His salary? $6500 for the year.

By 1973 Tyrrell Racing was considered one of the top Formula One teams, having secured the World Championship for Jackie Stewart in 1969, 1971 and 1973. Their total budget for 1973, building their own cars, purchasing engines from Cosworth, traveling the world, winning championships? $2.5 million. That’s $2.5 million dollars at today’s value, or about $450,000 in 1973.

In the early 1970’s, a typical British Formula One team would employ fewer than 25 people.

Fast forward to the tobacco era and beyond. All dollars converted to 2020 values:
McLaren budget 1982: $34 Million.
Lotus budget 1988: $50 Million.
Ferrari budget 1990: $64 Million.
McLaren budget 1993: $81 Million.
Ferrari budget 2013: $390 Million.

More recent numbers:
Mercedes Grand Prix: 2019 budget $425 Million. 1000+ employees.
Red Bull Racing: 2019 budget $310 Million. 860 employees.
Scuderia Ferrari: 2019 Budget $410 Million. 950+ employees.

How about driver salaries? Here are a few from the current (2020) season, and remember that it is now almost the first of June and there hasn’t been a single race as of yet.

Lewis Hamilton: $60 Million, Sebastian Vettel: $40 Million, Charles Leclerc: $30 Million, Daniel Ricciardo: $34 Million.

On the other side, there are the drivers who have to pay, who have to bring money or sponsors to drive in Formula One. Back in 1972 Niki Lauda got his start in Formula One, borrowing about $550,000 (in 2020 dollars) to buy a ride with March in both Formula Two and Formula One (his cash infusion to March likely saved the company). Once Lauda caught the eye of Enzo Ferrari, Ferrari signed him to a contract which included Ferrari paying off his bank loan. Those were the days.

Today’s paying drivers bring huge sums to join the Formula One circus. Pastor Maldonado (remember him?) was paying roughly $35 Million of Hugo Chavez’s Venezuelan PDVSA oil money per year to drive for Williams and Lotus. Lance Stroll (well, his daddy wrote the check), was paying roughly $25 Million per season to Williams before his father Lawrence bought the Racing Point Team and therefore secured Lance’s ride for the foreseeable future.

Now we are in the midst of the Coronavirus Pandemic, with Formula One seeing huge drops in income (along with many people and companies who live in the real world). For some reason, the powers that be in Formula One must have thought they were insulated from world events (after all, they live in a bubble and just communicate with their peers and don’t see the world as it really is). Perhaps they are finally waking up, but they have awakened far too late, have put the alarm clock on snooze one too many times, for the world is moving on and Formula One suddenly finds itself as being irrelevant, unneeded and a superfluous luxury for auto manufacturers, sponsors and many former fans.

Perhaps Sebastian Vettel said it best: “The moment money becomes your motivation, you are immediately not as good as someone who is stimulated by passion and internal will.”

That pretty much sums up the current state of affairs in Formula One.

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