Joe shines a light on Ferrari’s inequitable position in F1 – and thinks they’d be better off not drawing attention to their unfair financial advantage in the sport.
This year, in Formula 1, Ferrari did pretty well at the racetrack. The car was probably better overall than the Mercedes – less difficult to tune to the troublesome Pirelli tyres, but Lewis Hamilton and Mercedes still came through to win both titles (drivers and constructors). In part, this was due to the relatively poor performances of Kimi Raikkonen, who rarely came close to Sebastian Vettel – apart from the odd quick lap in qualifying. In part, Ferrari’s failure was due to mechanical trouble, which caused Vettel to retire in Japan and to start from the back in Malaysia, but probably the biggest cause of lost points this year was Vettel’s own behaviour – his petulant behaviour in Baku, which cost him a victory, the collision with Raikkonen and Max Verstappen at the start in Singapore and the first lap dramas in Mexico, where he was too aggressive. After a poor 2016 season Ferrari, under the technical leadership of Switzerland’s Mattia Binotto, did a good job closing the gap to Mercedes.
Off the track, however, Ferrari did less well. The new chairman, Sergio Marchionne, who clearly calls the shots at Maranello, threatened to pull Ferrari out of the sport if the new commercial rights owners, Liberty Media, brings in new rules that disadvantage Ferrari.
“I think you need to be absolutely clear that unless we find a set of circumstances, the results of which are beneficial to the maintenance of the brand in the marketplace, and to the strengthening of the unique position for Ferrari, Ferrari will not play,” Marchionne said.
The F1 community was not really impressed by this. Ferrari has raced in F1 since 1950, but long service should not really qualify the team for the huge amounts of extra money that the team is paid each year. It enjoys a massive unfair advantage, being given five percent of F1 revenues, before it gets any prize money. That’s about $90 million. In addition, because it’s able to stay in the top three in terms of winners of races in the last four seasons, it’s eligible to the Constructor Champions’ Bonus (CCB) scheme. At the end of 2017, the top teams – in terms of wins over the four previous seasons (2013, 2014, 2015 and 2016) – are as follows: Mercedes 54 wins, Red Bull 18 wins and Ferrari 5 wins. The only other winning team was Lotus, with one victory at the start of 2013. The CCB does not take into account the number of wins, just the position in the hierarchy and so Mercedes got $37 million, Red Bull $33 million and Ferrari $30 million. Thus, before its actual prize money, which is usually around $100 million, Ferrari gets $120 million from the Formula 1 group. This means it gets about three times more than a midfield team. In addition, of course, Ferrari has big sponsorship because of who it is. Plus, it also sells far more merchandising than anyone else and so it’s fair to say that Ferrari probably runs its entire F1 programme for free each year – and maybe even makes a profit from going racing. One can understand why Ferrari wants to keep things as they are, because F1 is the company’s only advertising. One can also understand why it is that everyone else in F1 thinks it’s unfair.
This served Bernie Ecclestone’s purposes when he was in charge of the commercial side of the sport, because it meant that Ferrari was always on his side and the teams were divided and thus could be conquered. Today, Formula 1 is on the NASDAQ Stock Exchange in New York and it must follow rules that were previously not relevant. And it cannot be seen to be favouring one competitor over another. It’s simply not good governance. It’s clear that Liberty does not want to lose Ferrari, but, at the same time, they also understand that continuing to have rules that favour the current big teams will mean it’s less likely that other brands will join the sport – and that makes it harder to grow the business, particularly if all the teams are constantly quibbling with one another. They want the teams to pull together and work for the greater good.
Ferrari’s approach, while on the surface understandable, makes no sense at all. By threatening to quit Formula 1, it risks drawing attention to the currently unfair arrangement. If people begin to understand that Ferrari had such advantages, they may begin to understand that the team is not quite as attractive as it appears. Ferrari says that its brand “symbolizes Italian luxury, exclusivity, performance, design and quality” and is “a legend built on decades of sporting successes and the inimitable style of our cars – a source of inspiration for millions of enthusiasts.”
The truth is that Ferrari is all about success, or the aspiration for success. When people become rich they buy a Ferrari to advertise their wealth. Just like buying a watch because it costs $1 million, this is not about engineering. It’s about showing off. If fans begin to understand that Ferrari has an unfair advantage, and despite all the extra cash has not won a World Championship in 10 years, the brand could be damaged.
The other important point is that Ferrari has nowhere to go if it does leave Formula 1. It’ll need to find a new way to advertise its cars and there aren’t many options to match the market penetration that Formula 1 enjoys. And that means spending money that shareholders don’t want to do. Ferrari is unlikely to find a race series that will pay for most of its costs – as F1 does. Indycar and Formula E will not do so and, in any case, they require teams to use a standard chassis – which is not part of the Ferrari ethos. There is the World Endurance Championship, where it races GTs, but it would need to fund an LMP1 programme if it wants to make more of an impact. And even if it does that it would need to advertise its victories.
In other words, Ferrari has no real choice but to go racing on a fair basis – painful though that might be!
Joe Saward has been covering Formula 1 full-time for 29 years. He has not missed a race since 1988.