Why Bernie Ecclestone could, and should, buy Champ Car now

 by Mark Cipolloni
May 4, 2004

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The calculating genius of Bernie Ecclestone is never one to overlook a good business deal

A year ago reports were rampant that Bernie Ecclestone was going to buy into what was then CART.  He didn't do it then so why should he do it now?  By now some of you probably think here we go again, more Bernie Ecclestone buying CART/Champ Car fantasy talk.  Perhaps you're right, but if you bother to read further you will learn that indeed sound business arguments can be made for why Ecclestone should do this. 

Whether by accident or by strategic planning, what is unfolding before our eyes in the world of open wheel racing could have major implications for the future of the sport.  Amid fears of fan complacency and Ferrari domination, Champ Car is planning major changes to its engine and chassis package and the FIA has proposed massive cost cutting and sporting changes to Formula One. 

Meanwhile, Bernie Ecclestone is busy revamping the F1 motorsports calendar like never before, but although there have been some rumors about Bernie either moving the USGP to another venue, or adding a 2nd USGP to the already crowded F1 schedule, in reality with NASCAR's monopoly on the USA market, F1 is going to remain largely obscure unless he does something significant, significant enough to loosen NASCAR's grip on everything racing in the USA.

Bernie Ecclestone was looking at buying the Champ Car Series a year ago but backed away for two key reasons - 1) CART was still a public company, and stamping his name on the series would have made it difficult to take private because the stock price would have climbed through the roof.  2) Bernie has a non-compete clause in the current Concorde Agreement which would have prevented him from buying into another open wheel series.

Since then several key things have occurred that now make the idea of him buying, or buying into the Champ Car World Series not only possible, but perhaps the deal of the century.

Argument 1  Faced with too many venues that want an F1 race, Bernie has a dilemma - the Concorde Agreement only allows for 17 maximum F1 races a year, and the new agreement currently being negotiated can perhaps hope for 20 at the very most.   With both series owned by Bernie, he would have 33 races to offer the race promoters/governments around the world (see hypothetical 2006 schedule below). 

Argument 2  Threatened with a breakaway series, some unhappy engine manufacturers who feel they are not getting enough for the money they are spending in F1, and runaway costs, Bernie and Max Mosley must find a way to bring costs down and deliver more value to the manufacturers.  The FIA (Mosley) recently proposed sweeping changes to the F1 regulations (customer cars, customer engines, standard electronics, multiple race engines, no entry fee for new teams, etc.) that would reduce costs to field a competitive 2-car team to around $30 million per year.  If implemented, costs would be reduced significantly, but how do Bernie and Max deliver them added value?  (See Argument #4.)

Argument 3  Kevin Kalkhoven is a Venture Capitalist.  He and his Venture Capital partners at KPLJ Ventures  don't invest huge amount of capital into a company without a solid plan to make a reasonable return on their investment within five years. Kalkhoven is new to racing.  Is he all of a sudden willing to lose significant sums of money because all of a sudden racing is his first love and he's willing to go broke having the time of his life owning Champ Car?  Something doesn't add up. 

Kalkhoven has gone on record that they plan to lose money the first two years (2004 and 2005) but by the third year they will be making money.  It doesn't take a rocket scientist to figure out that without car manufacturer support that isn't going to happen.  Car manufacturers have historically been willing to spend huge amounts of money in racing because selling cars and showcasing your product on a race track in competition with your passenger car competitors have a lot of synergies. 

So what is the plan?  How does OWRS lure engine manufacturers into the series when they would not be negotiating from a position of strength, but one of hat in hand begging for their support? 

Argument 4  The Champ Car World Series has many fantastic North American venues, but is in desperate need of engine manufacturers if it is to survive.  For decades Bernie Ecclestone has been trying to make a big splash in the USA with F1 but has met with mediocre success in, this, the world's biggest passenger car market.

If Bernie Ecclestone buys into the Champ Car World Series, renames it F1 West (vs. F1 East for the existing European based series), and immediately announces that Champ Car will run to the same car and engine specifications as proposed by Max Mosley for F1 starting in 2006, several birds can be killed with one shot. 

Champ Car immediately gets the manufacturer support they need because the new rules would stipulate that each manufacturer must supply engines to at least one 2-car team in each division at a set maximum price.  The manufacturers get immediate value because for far less money than they are spending today in F1 they get 13 races in the lucrative North American market (for most their largest passenger car market) versus just two today (Montreal and Indy).  With 33 total races as proposed below, they still retain ample worldwide exposure in addition to now having the North American market well covered with a top-level racing series.

Argument 5  The Champ Car World Series (F1 West)  would benefit from having all its races broadcast through Bernie's existing TV outlets around the world and with a total of 33 races, Bernie can offer these broadcasters an F1 race every weekend from the end of February to the beginning of November.  Part of the success of NASCAR is due in large part to the fact that its fans know there is a NASCAR Nextel Cup race to watch or to attend nearly every Sunday afternoon from mid-February to mid-November.  There is far more continuity by having a race every weekend  - just like football, soccer, hockey, basketball, baseball and all the other stick and ball sports.  By having open wheel races two, and sometimes three, weeks apart you lose the connection with the casual fan and even the hard core fans, with their ever increasing busy lives, who are hard pressed to remember to tune in.

The proposed schedule below consists of two divisions, F1 West based in North America (current Champ Car teams) and F1 East based in Europe (i.e. current F1 teams).  Each division would have 13 regular season races and crown a division champion.  Then like in NASCAR, and every stick and ball sport on this earth, there would be a playoff series of races to crown the overall World Champion.  

In the hypothetical schedule below I propose 7 joint races, arguably at some of the best venues to determine the champion.  The top 10 drivers from each division would have the opportunity to compete for the overall title and will go into the final 7 playoffs in the same order they finished the regular season based on points scored during the regular season.

Going into the final 7 playoff races, imagine the rivalry that will be played out in the media on both sides of the Atlantic.  The fans will be riveted by national pride, East against West, the Americans against the Europeans.  The racing world, and perhaps the entire sports world, would be focused on the fierce fight about to unfold for the World Championship crown (both drivers and manufacturers).  Who is better, the Americans or the Europeans?  We shall decide once and for all.

Each of the top 10 drivers from the regular season in each division would start with the following points based on where they finished in the regular season.  In this way the drivers would be rewarded for how high up in the standings they finished during the regular season, but the 10th place driver would still have an outside chance to claim the overall crown. 

Drivers and manufacturers points would be awarded based on the current F1 system 10-8-6-5-4-3-2-1 for 1st through 8th.  With 7 races, there would be a maximum of 70 points that a driver could accumulate toward the overall championship.  These would be added to the points they would start with as determined from their regular season finish.  The maximum total points possible would be 100 if a driver were to win the division championship and all 7 playoff races.

Starting points for playoff races based on regular season standings of top 10 drivers
1st:   30 points
2nd:  26
3rd:   24
4th:   22
5th:   20
6th:   18
7th:   15
8th:   10
9th:    5
10th:  0

Hypothetical 2006 Schedule
Date F1 West (North America Based) F1 East (Europe Based)
Feb 26 Miami, FL  
Mar 05   Melbourne, Australia
Mar 12 Rio de Janeiro, Brazil  
Mar 19   Sepang, Malaysia
Mar 26 Monterrey, Mexico  
Apr 02   Umm Jidr, Bahrain
Apr 09 Long Beach, CA  
Apr 16 Easter Break - No Races
Apr 23   Imola, Italy
Apr 30 Beijing, China  
May 07   Barcelona, Spain
May 14 Chicago, IL  
May 21   Monaco
May 28 New York, NY  
Jun 04   Montreal, Canada
Jun 11 Vancouver, Canada  
Jun 18   Istanbul, Turkey
Jun 25 Cleveland, OH  
Jul 02   Magny-Cours, France
Jul 09 Toronto, Canada  
Jul 16   Silverstone, England
Jul 23 Denver, CO  
Jul 30   Hockenheim, Germany
Aug 06 Elkhart Lake, WI  
Aug 13   St. Petersburg, Russia
Aug 20 Montreal, Canada  
Aug 27   Spa, Belgium
Sep 03    
  Overall Championship Rounds (Top 10 drivers from each division)
Sep 10 Monza, Italy
Sep 17  
Sep 24 Shanghai, China
Oct 01 Seoul, South Korea
Oct 08 Suzuka, Japan
Oct 15  
Oct 22 Surfers Paradise, Australia
Oct 29  
Nov 05 Mexico City, Mexico
Nov 12 Las Vegas, NV

Is this entire concept just my fantasy, or does it make sound business sense because it's a win-win situation for everyone if all the big egos can be set aside for a moment?  Bernie gets more venues to sell and make money, he delivers the lucrative North American market to the manufacturers in a major way, Champ Car gets itself the manufacturers and worldwide TV distribution it needs and the sport of Formula One, and perhaps more importantly road racing, gets a major boost (fan attention and sponsor/manufacturer value) against the growing threat of the oval track cartel who is planning to expand worldwide.

You decide.  More importantly, Bernie has to decide.

The author can be contacted at markc@autoracing1.com

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