Formula 1 takeover by Liberty Media: Can F1 be liberated from its 'dysfunction'?

Chase Carey & Bernie Ecclestone
Liberty Media chairman Chase Carey chats to F1 boss Bernie Ecclestone

Formula 1 is about to be under new ownership - and it could lead to profound changes in the sport.

US group Liberty Media is poised to complete its takeover of the commercial side of F1, possibly as early as this week, and has big plans to grow the sport in a number of areas.

At the same time, it has problems to sort out. The man picked by Liberty as F1's chairman - former Rupert Murdoch lieutenant Chase Carey - has been told in meetings with senior figures over the past few months that F1 is "dysfunctional" at present.

So what is around the corner in this brave new world?

The existing state of F1

If they were not before the deal was made, Liberty are well aware now that the sport they are taking over could be in better condition.

Carey has been publicly quiet since Liberty bought the first tranche of its shareholding in September, but he has spent the time getting to know what the company that employed him has bought.

His findings were:

  • The revenue system is skewed in favour of the already rich and powerful, to the extent that the smallest teams are struggling to survive and money is tight for about half the grid.
  • There is a lack of competition on track.
  • Television audience figures are dropping in many markets - although this is largely because of a switch to pay television, to make more money from TV rights deals.
  • The longest-standing races are struggling to fund themselves and risk dropping off the calendar
  • The decision-making process is not working properly.
  • Some significant business and sporting decisions have been made for solely financial reasons, disregarding other important factors, such as their effects on the sporting side.
  • An acceptance that F1 has lost some of its appeal, particularly a sense of edge and drama and as an extreme driver challenge.

Liberty has decided to change much of that. The question is how.

The Ecclestone problem

Many of those concerns can be laid at the door of F1 commercial boss Bernie Ecclestone - it was he who set up the governance structure, brokered all the financial deals and signed another three-year contract with Pirelli as tyre supplier against the wishes of the drivers and a number of senior figures.

Liberty had asked Ecclestone to stay on as chief executive officer under Carey, but for some time now the word inside F1 has been that the 86-year-old would be gone before long and on Monday he said he had been asked to step down from his position and take on a new one as a kind of honorary president.

It should be remembered that he is a fighter and a survivor and he has no desire to give up a business which he sees as his. And he has fought off at least one attempt by previous owners CVC Capital Partners to get rid of him.

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We'll make F1 bigger and better - Carey

But, whether he likes it or not, he will be an employee and therefore subject to the whims and wishes of his bosses - now Carey and Liberty owner John Malone.

Ecclestone has never really operated in such a situation before - by and large the previous owners, CVC, left him to his own devices. He likes to do things his way, and he is not one to enjoy outside interference.

Ecclestone's approach to business is adversarial. His problem is that Liberty have decided that they are going to run the business in a different way from now on - a more collegiate approach. He will either accept that and operate accordingly, or he won't be working there much longer.

It's hard to see how he could adapt to that way of working - or even want to. And senior sources in F1 say they believe that even if he does not go this week, they expect his departure to happen within a month.

Whether he stays or not, changes will be made to the business structure. Liberty will employ two people to head up the different branches of the sport and oversee changes - commercial on the one hand; sporting and technical on the other.

Ex-ESPN marketing chief Sean Bratches has been given the commercial role, and former Mercedes team boss Ross Brawn the other.

A historic European core

The history of F1 over the last decade or so has been the decline of the number of races in Europe, and the struggles of many of those remaining to meet Ecclestone's increasingly high demands for race fees.

Germany does not have a race this year, and its contract ends after next year's grand prix in Hockenheim.

Italy struck a new three-year deal at the 11th hour this winter. Silverstone is reluctantly toying with the idea of ending its contract after 2019 if it cannot renegotiate terms.

Through all this, Ecclestone has acted as if he does not care - if a race in Europe won't pay the fees he wants, he has usually said, he'll find one elsewhere.

There's usually a controversial regime wanting to stump up a wad of cash to host an F1 race.

Liberty want to end this. They see the historic European races - Britain, Germany, Italy, Belgium, for example - as a key aspect of F1 and one they have to nurture and cherish.

They recognise that Europe is F1's core market, where most of its TV audience is, and they want the races there to be the centrepiece of the 'new F1', one that has a visible link to a heritage it treasures.

Lewis Hamilton of Great Britain and Mercedes GP celebrates with the fans after winning the Formula One Grand Prix of Great Britain at Silverstone Circuit on July 5, 2015
Liberty Media want to protect F1's historic European races, like the British Grand Prix at Silverstone

New races

Ecclestone's ethos has been to take F1 to any country that wants it and has a large enough chequebook to fund it.

His eye has been on the deal itself - and not on its wider consequences on F1.

This is how F1 has ended up with races in Bahrain and Azerbaijan, countries with controversial records on human rights, and how Ecclestone has found himself for the last three years sitting next to Vladimir Putin at the Russian Grand Prix.

All three countries pay astronomical fees for their races - Russia $50m year; Azerbaijan a reputed $75m, for example.

Liberty wants to take a different approach. For them, deals based solely on the bottom line and nothing else are not necessarily the right deals.

They want to expand F1 - but they want new races to be held in the right places and for the right reasons. And they are prepared to invest to make it happen.

This is a massive shift from Ecclestone's approach.

The idea of spending money now to earn more later has largely been anathema to Ecclestone.

Some argue it has been one of the reasons why he struggled for so long to establish a race in the USA until Austin, Texas, came along.

Liberty are open about wanting races in New York and Los Angeles - or near enough to be easily identified as such - and are prepared to put down their own money to make it happen.

They have also talked about more races in Latin America and Asia.

new york city skyline
Liberty are in favour of introducing a race in or around New York - something that has always been discussed, but never seemed likely under Ecclestone

Expand through digital media and promotion

Carey has been clear that he sees the opportunity to expand the business "in all areas", but the one where there is most room for improvement is in exploiting the internet.

Ecclestone has made no secret of the fact that he does not really get social media, nor see any opportunity to monetise it.

Younger people in F1 have grown frustrated with this, and realise that there are any number of things that could be done.

But, aware that rare has been the person who has crossed Ecclestone without consequence, they have in recent years kept their counsel and waited for a change to happen.

Liberty are clear that this is an area where they see vast potential, and it's quite conceivable that, over time, the entire business model of F1 will change as a result.

Right now, F1 is sold as a whole package to one or sometimes two TV stations in a country. But insiders see the opportunity to sell it piecemeal through the internet, with varying degrees of access for varying amounts of money.

Nico rosberg looks into a TV camera lens
How Formula 1 is sold as a TV package could change drastically

Promotionally, too, there is a lot of room to make gains.

Ecclestone is called the "promoter". But many argue that's a misnomer - in that he doesn't really do any promoting at all.

Arrive in any city or country hosting a grand prix and it is often hard to tell there is an event going on.

Many races are not sold out - but how are people who might have a passing interest in going expected to know when that opportunity exists without them being advertised effectively?

Liberty are talking about having "20 Super Bowls". By which they don't mean an Americanisation of the event - but of making a bigger deal of the event itself wherever it is being held.

Build it up in the week before the race with various promotional activities and so on.

A focus on F1's key ethos

Many F1 insiders recognise that in recent years the sport has lost its way a little.

It remains the arena where the best drivers in the world race in the fastest cars, but its edginess has been dulled.

The risk and challenge are still there - but less apparent.

Liberty are keen to get this back.

This year's new rules - decided upon long before Liberty was involved - are a first step in that direction, with wider, more dramatic-looking cars expected to lap up to five seconds faster and provide a more extreme physical challenge for the drivers.

But the jury is still out as to whether this will work.

New 2017 specification tyres
Faster, more physically demanding, cars are on their way

No-one doubts the cars will be dramatically faster. The question is whether Pirelli has managed to build the more durable tyres that have been demanded to go with them.

F1 bosses have drawn up a set of requirements for Pirelli that they expect to lead to tyres on which drivers can push flat out most of the time - which has simply not been possible since 2011 because the tyres have been too fragile.

If this has not happened, it will turn out to have been rather pointless to make faster cars because the drivers will not be able to use all their potential.

Liberty - having taken over the contract Ecclestone struck with Pirelli - have been made aware of these issues and will be watching closely.

Another area which may come under scrutiny is driver head protection.

Governing body the FIA has been working hard on the 'halo' device which protects drivers from heavy flying debris. It is planned for introduction in 2018.

But while the vast majority of drivers are in favour of it, the FIA has recently said its introduction depends on a philosophical discussion about aesthetics and the nature of F1.

The halo could yet be abandoned if it is considered contrary to the ethos of open-wheel, open-cockpit racing - although the drivers may fight against this.

Everything is up for discussion - even the format of the race weekend itself. But Liberty wants to take an inclusive approach to any change, rather than the imposition Ecclestone has tended to pursue.

Will anything happen immediately?

It is easy to see problems with some of Liberty's plans.

For one thing, they - like any other business - are in this to make money. And if they are going to make the European races more affordable for promoters and spend money establishing new ones in America, they are going to affect the bottom line, at least in the short term.

But they seem deadly serious about it.

Ferrari's Maurizio Arrivabene and president sergio marchionne
Raw power: will Ferrari keep the $100m dollars they receive every year from F1 just for taking part?

Equally, there are unlikely to be big changes immediately.

Although Carey has been working hard for months, it will take time for Liberty to fully understand the business, and even longer to make some of the changes needed to its structures.

The immediate concern will be to tie the teams down to new contracts - those of everyone bar Renault end in 2020 - and with them, presumably, a changed prize money structure.

That in itself won't be easy - how will Ferrari react, for example, if they are told they cannot keep all of the $100m payment they currently receive just for being Ferrari?

Change is definitely coming, though. Be in no doubt about that.

View the 2017 F1 race calendar here