02/08/2011
NEWS STORY
The internet is still ablaze with angry comments from incensed fans following Friday's surprise announcement that the BBC and Sky Sports will share coverage of F1 from next year. The one silver lining for those who already have Sky subscriptions is that its coverage is promised to be of an extremely high quality. However, if a report today on Sky Sports' sister channel Sky News is anything to go by, its credibility may not be all it has been cracked up to be.
The report comes courtesy of Sky News' blogger Mark Kleinman who occasionally writes about F1 and is known in the media industry for overusing the word 'exclusive'. Today's report seems to be the best example of this. It is entitled 'Exclusive: F1 Owner Faces Crunch Investor Talks' and in it, Kleinman says "I have learned that CVC Capital Partners, which bought F1 in 2005, will hold a crucial investor summit in London in September." He claims that at the meeting "it will face tough questions about its stance towards bribery allegations distracting from one of the sport's most exciting seasons for years."
The meeting with CVC's investors, who are known as limited partners, is called, surprise surprise, a limited partner meeting and it takes place every year in September. Last year's is believed to have taken place at a top central London hotel and there is even a video online of the meeting which took place in September 2006 and featured a presentation about F1. Bernie Ecclestone, chief executive of F1's parent company Delta Topco, was interviewed by commentator Steve Rider at the meeting and there were presentations there by CVC co-founder Donald Mackenzie and F1's chief financial officer Duncan Llowarch. F1 was heavily featured since it was one of CVC's newest investments (known as portfolio companies) but this was not repeated last year and it remains to be seen whether F1 will be anywhere near as prominent at this year's LP meeting.
Anyone writing about CVC's business should know about its annual LP meetings, particularly since they are covered extensively online as the video above demonstrates. Accordingly, it is most certainly not exclusive news to say that it is taking place. Indeed, for the benefit of Sky News' readers, Pitpass' business editor Chris Sylt pointed out in a post below Kleinman's blog report that CVC hosts LP meetings regularly.
It isn't the first time this has happened as Sylt contacted Kleinman when he wrote in February that F1 "faces being thrown into turmoil this evening" as a result of an investigation by City firms Ernst & Young and Freshfields into the circumstances surrounding the sale of F1 to CVC. What the report failed to point out, as Sylt said at the time, is that E&Y and Freshfields were retained by F1 and had advised on the sale to CVC so it was highly unlikely that they would find anything untoward on looking over it a second time. This is exactly what happened as the investigation gave F1 a clean bill of health and the sport certainly wasn't "thrown into turmoil" in February.
Following this came the claim that "CVC paid north of $2.5bn to gain control of F1 in 2005-06," but, as Pitpass revealed, the precise amount it was sold for was $1,714,362,000. Since then we have had months of 'exclusive' reports saying that more people than you could shake a stick at are connected to a bid for F1 by Sky News' 39% owner News Corporation. It may sound great but that would be overlooking just one teeny weeny detail which is that News Corporation has not made a bid for F1. As yet it is nothing but a pipe dream so it is little wonder the print media has stopped reporting on it.
It isn't just Pitpass which has spotted Sky News' overuse of the word 'exclusive.' The Daily Telegraph dedicated an article to it and this theme was also recently picked up by the eFinancialCareers website. However calling this latest tale an 'exclusive' really does seem to take the biscuit. Ironically there is a great deal of genuinely exclusive news to dig up about the business of F1 at the moment.
Sylt recently revealed that Ecclestone paid F1's former chairman the $45m at the centre of a bribery claim. This was followed by the revelation that more people are being accused in the case - news which has subsequently been confirmed by other media outlets. Over the weekend we had exclusive news from Ecclestone about the 2012 calendar and over the next few days we will have exclusive news about the 2014 regulations.
One would have thought that Sky News might have some inside information on the new deal between its sister channel and the BBC. In the absence of that Sylt looked through some of Kleinman's previous blog posts and came across an interesting comment about News Corp's phantom bid for F1. It said "given that people close to the situation say that News Corp is keen to broaden F1's appeal among younger audiences, I'm led to believe that the notion of it restricting F1 to its own pay-TV platforms is a red herring."
In short, Kleinman claimed that it was a red herring to suggest that if News Corp were to buy F1 it would restrict it to its own Pay TV channels. Well, F1 has of course now been moved to its most well known Pay TV channel. Whilst it is not restricted to Sky Sports, it will be broadcasting all the races live and half of them exclusively - enough for most fans to consider it restricted. So presumably either it is not a red herring or News Corp isn't buying F1 until 2018 when the Sky deal expires.
It seems most likely that in fact News Corp's apparent interest in acquiring F1 was a cover for what was really going on in the background - its takeover of the UK F1 TV rights. In reality, as Pitpass has pointed out repeatedly, a News Corp acquisition of F1 would not get the green-light for a number of reasons - not least of which being opposition from CVC, the FIA (which has a veto on any F1 takeover) and the teams. Then came News Corp's phone hacking scandal which sucked any remaining life out of the phantom deal.
The BBC-Sky deal presents yet another roadblock. The reason for this is that it would put News Corp on both sides of the table since it would be receiving money from broadcasters as an owner of F1 and paying money to F1 as a broadcaster itself. It is this same kind of competition conflict which prevented BSkyB from acquiring football team Manchester United in the late 1990s.
The phantom deal shows just how little News Corp understands about F1. As Pitpass has reported a representative of an investment bank which works with News Corp has said that the media company bizarrely thought that the involvement of Exor, which ultimately owns a stake in Ferrari, would add credibility to its position. If so, it has some fast learning to do.
BSkyB may have been blinded by F1's 527 million unique viewers however their interest in the sport is very different to that of the typical football fan which Sky Sports is well acquainted with. All it takes is a few minutes walking down a street in the UK to find people who never miss a football match with their favourite team when it is shown live on TV, whether they watch at home or in a pub. These people are likely to buy pay TV subscriptions to watch football. It won't take much longer to find people go to see all matches played by their favourite team at its home ground. They are very likely to buy football pay TV subscriptions. It wouldn't be that hard to come across random people on the street who go to see all matches played at home or away by their favourite team. These fanatical fans are even more likely to buy pay TV football subscriptions.
In contrast, how long would it take to walk down a typical street in the UK before you find someone who never misses an F1 race live on TV? There are plenty of these fans out there but they are by no means as numerous as their football-fanatic counterparts. However, how long would it take to find someone on the street who goes to the British GP every year? Then how long would it take to find someone who goes to every GP every year? It shows how hard it is likely to be for Sky to find fans who are prepared to pay for its service. F1 may have more fans than other annual sports but the majority are casual, rather than fanatical. This is of course the key reason why F1 teams only get a tiny percentage of the revenue which football teams get from merchandise.
Anyone who thinks the Sky deal will lead to F1 being watched in pubs obviously hasn't thought it through. Quite simply, there is no tradition of watching F1 in pubs as there is with football. There is also the problem that the timing of F1 clashes with football matches and these already have the run of the pubs and bars. The failure of the F1 In Cinemas scheme a few years ago is testimony both to this and to why people are unlikely to pay to watch F1 in the UK.
What will be interesting will be to see if Sky News' coverage of F1 continues in a similar vein once its parent BSkyB becomes the UK host broadcaster of F1 next year. We aren't suggesting its coverage will change but we are interested to see if it does. The reason for this is that host broadcasters generally don't tend to write 'exclusive' articles about the sport or Ecclestone entitled, for example, 'Prosecutor widens F1 bribery probe' or 'Ecclestone faces questioning over F1 bung probe.'
Indeed, broadcasters tend to cease most searching or critical coverage of the sport when they begin their contracts and resume it when they end. For example, the BBC broadcast a highly critical Panorama documentary about F1 (which former FIA president Max Mosley wanted to sue over) in November 1998 which just happened to be the year after ITV took the F1 rights from it. It isn't known whether F1's broadcast contracts contain a clause preventing the host network from reporting critical or potentially negative news about the sport. It may well make sense and it sure wouldn't be a surprise.