by Max Mosley
Under the agreement, the teams were to keep control of the commercial side of Formula One for the next four years. This meant Bernie could continue to collect money from the promoters on behalf of the teams, and Balestre’s ambition to take everything for the FIA was temporarily (as he thought) on hold. It was agreed that the FIA would continue to control the sport, but the rules were to be made by a Formula 1 Commission (constituted as in the original Modena Agreement) subject only to the FISA World Council, which could reject a proposal of the F1 Commission but not change it. The council could only send it back to the commission to be reconsidered. Surprisingly, this never gave rise to the obvious potential problem of stalemate, with a commission proposal being repeatedly blocked and sent back by the World Council. The teams were to have a member and deputy on the World Council (Bernie and me). Additionally, Ferrari (i.e. Marco) were to have the motor industry seat whenever Formula One was being discussed.
Balestre had not given up on his plan to secure complete commercial control of Formula One, but all the teams, including Ferrari, were united against him on this point. The Concorde Agreement was for four years, after which Balestre planned to try once again to take over the commercial side. Had this ever happened, legal problems would probably have emerged because of European competition law. But in the event, Bernie and the teams made sure the agreement was renewed in 1985 for two years and a new five-year version signed in 1987. Yet another five-year Concorde Agreement was signed in 1990, for the years 1992 to 1996 inclusive. The latter agreement covered the first five years after I was elected president of FISA, although it had been signed nearly two years earlier. Except for a gap in 2008 and 2009, it has governed Formula One ever since, albeit with modifications.
The potential legal difficulties under European competition law of a sporting body having control of the money as well as holding absolute power over the sport remained academic because the agreement gave the teams commercial control. The competition law point was only finally resolved 20 years later when, as part of its settlement with the European Commission, the FIA undertook not to exploit any section of motor sport commercially as a condition of retaining absolute power as the sole licensing authority for international motor sport with no rival regulators.
While all these conflicts were playing out, Bernie was building up the Formula One business. At the same time, he repeatedly asked the members to participate in the financial risk for races whenever the promoter wanted them to do this, but the teams always refused. Bernie eventually took on the (considerable) risks himself and this, ultimately, was the main reason he was able to make a fortune from Formula One. He was also working to get more coverage on television. In those days, it was not a question of fees but exposure for sponsors. Gradually, he got TV companies to move away from showing parts of the most interesting races to broadcasting the entire race to televising the whole season. It proved to be a very lengthy process. As early as May 1980, FOCA voted him a budget of $150,000 to begin the development of on-board cameras for television.
There was also constant work on rationalising the events. Traditionally, each organiser set its own schedule for practice and the race. Practice would go on for most of two days, all times counting for the grid. The start was usually given by an ageing figure from the national club, like the old boy in Monaco who would pose with the flag in front of the cars, wave it, then dash out of the way as they accelerated. The grid would be alternate rows of three and two cars, lined up beside each other. The race director would be a local motor club official in each country, usually with very limited Formula One experience.
All of this and more had to be sorted out. First, we had to have agreement on each point within FOCA then begin the long and painful process of persuading the organisers and then, finally, the F1 Commission. The slick, efficient procedures and safety precautions that are the norm at a modern Grand Prix took many years of tedious meetings and negotiation to achieve. Indeed, the process was not completed until I became president of the FIA many years later, but mercifully we were on our way at last. But the most fundamental change was that the Concorde Agreement had made it possible for Bernie to build one of the most successful businesses in modern sport.
14
BERNIE BUILDS HIS BUSINESS
When Robin Herd and I started March in 1969, the Formula One World Championship had been running for 20 years. It had a big following worldwide but as the Porsche deal in chapter 5 made clear, it was not nearly as important commercially as long-distance racing, which included events such as the Daytona 24 hours, Sebring 12 hours, Nürburgring 1000 km, Brands Hatch 500-mile race and, of course, the Le Mans 24-hour race. Although there had been a slight decline due to budget cuts by the car industry, long-distance racing was still streets ahead of Formula One.
When Bernie Ecclestone bought the Brabham team two years later, Formula One was very much the poor relation of sports cars and the so-called ‘sports prototypes’. In our sport the financial prizes for success in a race were minimal. The real money, such as it was, came in the form of a payment to each team from the race promoter, negotiated individually and known as ‘start money’. Sometimes the promoter was a commercial organisation, but major events, including Formula One, were usually promoted by the national sporting authority.
This arrangement worked against the teams’ best interests. The promoter would know that a top team absolutely needed to participate in the event to earn World Championship points, which meant it could offer a reduced, take-it-or-leave-it fee. And a back-of-the-grid team would be told that the promoter didn’t care whether they turned up or not. In both cases the promoters were in a strong position, which eventually pushed the teams to try collective bargaining.
Promoters countered this by also negotiating collectively, at least for the European races. I took part in my first meeting of this kind early in 1970, before the first race of the season. The teams turned up as a group because they didn’t trust one another not to do side deals. Once the teams had seen the March cars actually run, they invited me along because I was a lawyer. That first meeting astonished me – I simply could not believe a world sport was run like this. The level of discussion and negotiation would have been OK for a village football club but that was about it. They would even undermine one another’s points; for example, one asking for free hire cars, another saying ‘but we’ve never had that’, all in front of the promoters.
During this period, the payment system in Europe moved from individually negotiated start money and minimal prize money to one where rewards were dependent on a team’s performance during practice and the race. Elsewhere, teams still dealt individually with the organisers because of travel costs, but this too eventually became a collective arrangement when Bernie started doing deals for the teams as a whole. The race promoters were all either the national motor sport authority itself or very closely connected to it. In this way, through the FIA, the promoters had complete control over the international calendar and the rules, as well as all commercial aspects of their events.
Shortly after Bernie bought Brabham at the end of 1971 he and I began to negotiate for all the teams. The organisation (such as it was) was called the Formula One Constructors’ and Entrants’ Association, and included ‘entrants’ because individuals were allowed to buy Formula One cars from a constructor and compete in the championship. A privately entered driver could score points but the points he scored for the Manufacturers’ Cup would go to the company that built the car. The best example of a private entrant was Rob Walker, who won the 1961 Monaco Grand Prix with Stirling Moss and the 1968 British with Jo Siffert.
The association was managed by Andrew Ferguson, an ex-employee of Lotus recommended by Colin Chapman and trusted by everyone. Each team paid an annual subscription to cover the costs. It was very difficult to collect the money, and eventually we resolved that the prize fund would be paid directly to the association and shared out on the agreed scale to the teams after deducting 2 per cent for running
costs. After a while, Bernie took over the secretariat with the agreement of all the teams and employed Peter Macintosh to run things. Peter had previously been in charge of the Red Arrows and had flown the spare plane to events. As the organisation took on more duties and scope and became more professional, Bernie increased his deduction to 4 per cent. By the 1980s it had doubled again to 8 per cent. Unlike paying a subscription, it was not painful because no one knew before the race what they would earn.
In his dealings with each promoter on behalf of the teams, Bernie began to get them to throw in the television rights as part of the prize fund. With one or two exceptions, they were of no value back then because it was very difficult for most races to sell the broadcast rights beyond the host country. Except for Monaco and perhaps the Italian Grand Prix, foreign rights were all but worthless because hardly any TV company wanted to show overseas races. Eurovision controlled all international rights within Europe and fees were either negligible or non-existent. At the same time it was widely believed in the 1970s that a promoter should not allow the race to be broadcast in its country because no one would buy tickets if they could watch it on television for free. Nowadays, everyone knows that’s nonsense, but it was firmly believed back then. Because of these myths and timidity, television coverage throughout the decade of Stewart, Lauda, Fittipaldi, Peterson, Hunt, Andretti, Scheckter et al was scandalously sparse.
The objective at that time was not to increase revenue by selling the rights; the aim was to increase the coverage. The greater the coverage, the more money the teams could get from sponsors. With the rights in his pocket, Bernie bypassed Eurovision, who fought back in vain. Next, he began to withhold rights from broadcasters unless they guaranteed to transmit the entire race; and once he had persuaded a rapidly increasing number to screen individual Grands Prix in full, he began to push them to show the whole season.
The rights still brought in almost no money, but the coverage expanded enormously year by year. So did the audience because the season began to take on the narrative arc of a soap opera that could be followed from race to race. At last, by the end of the 1980s, the value of the rights themselves began to rise sharply and, by then, Bernie, on behalf of the teams, had all the TV rights to the championship – even Monaco, who were the last to relinquish them to him.
Ten years earlier, when the FOCA–FISA war started, the commercial rights were one of the things that disturbed the FIA. Although the FIA had never owned any commercial rights in the Formula One World Championship, Balestre noticed that Bernie was acquiring more and more rights for the teams from the race promoters. Balestre felt that these rights should be taken over by the FIA.
As FOCA, we had raised the question of what were then Articles 85 and 86 of the Treaty of Rome (abuse of a dominant position) in the mid-1970s because the race promoters had such disproportionate commercial power. As a result of their membership of the FIA, they had complete control over both sporting and commercial aspects of Formula One. But no one in the FIA at that time took European competition laws, or what was then the European Commission’s DG4, very seriously.
Part of the 1981 Concorde Agreement provided that all commercial aspects of the championship would be exploited by FOCA on behalf of the teams. In return, FOCA had to recognise that the rights to the championship belonged to the FIA. Balestre’s intention was that these rights would go to the FIA when the agreement ended four years later. Had the agreement come to an end, things might not have been that simple. The promoters from whom Bernie had acquired rights would probably have pointed out that these had never belonged to the FIA, and an acknowledgement from Bernie and the teams that the championship rights belonged to the FIA could not change that.
Most importantly, the agreement gave the teams (effectively Bernie) the right to make all contracts for a Grand Prix. This simply recognised the de facto position that a promoter could not put on a race without the teams. In effect, this gave Bernie and the teams control of the calendar, the one element of the championship that arguably did belong to the FIA or, rather, collectively those members of the FIA that organised and promoted Grand Prix races. However, Balestre insisted that the teams must individually submit an entry for the entire championship to the FIA. This further weakened the promoters, each of whom originally had the individual right to accept or reject an entry.
Had Balestre ever succeeded in acquiring all the commercial rights for the FIA, there might have been significant legal problems. Brussels could have challenged how such a monopoly operated under the Treaty of Rome. Moreover, Bernie had been very careful to make sure his contracts with race promoters and television stations never all expired at the same time. So any attempt by a third party such as the FIA to take over could be met with legal action claiming interference with contractual relations, the weapon FOCA had used back in the winter of 1980/81.
Bernie also wanted to control the advertising rights at each circuit during a Grand Prix. Initially, at least, this was nothing to do with making money – it was to stop advertising interfering with the television broadcast, or perhaps preventing a Grand Prix being shown at all in some countries because of objectionable trackside advertising. Circuit advertising also tended to be sold by the square metre and some circuits were plastered with logos, often of small local companies. It all looked messy and down-market, as well as sometimes breaching television guidelines. There was also the problem that circuits would offer advertising at rates below the increasingly large fees paid to the teams by their sponsors. Bernie realised that by cleaning all this up he could make each Grand Prix look better, protect the teams and, most importantly, keep the television companies happy.
But how to do this when he already had his hands more than full? The solution was Paddy McNally, who had been around motor racing for a long time. I first came across him when I went to buy two magnesium front wheels for my U2 from Robs Lamplough back in 1966. I found Robs and Paddy having dinner in a restaurant near Robs’s place in Adam and Eve Mews in Kensington. They were both wealthy amateur racers and Robs later drove in that Hockenheim Formula Two race where Jim Clark was killed in April 1968. Later still, Paddy became Autosport’s Formula One correspondent, then went to live in Switzerland with his wife and joined the Philip Morris Formula One programme to look after their Marlboro circuit advertising.
With several years’ experience of the business, he was the ideal person to take control of circuit advertising. Encouraged by Bernie, he set up in business and bought the circuit advertising rights from each organiser. By reducing the number of advertisers and repackaging the way these rights were sold, he turned it into a very successful business. He also created the Paddock Club, where sponsors could entertain their guests, fully understanding that you could charge outrageous prices if you provided an exemplary service. After some 25 years of this, Paddy retired a few years ago a very rich man.
Perhaps the most interesting development of all was how Bernie came to have the right to make all the race contracts for Formula One and thus, in effect, control the championship. To begin with, he dealt on behalf of the teams (with a bit of help from me). As already noted, he charged them collectively 2 per cent of the fee he managed to extract from the race promoter. This gradually increased to 8 per cent. He also offered to negotiate film and television rights in return for 30 per cent of what he could collect for them and, again, the teams agreed.
Then, in the late 1970s, two things happened. First, Watkins Glen, the home of the United States Grand Prix, failed to pay the agreed prize fund. The teams were understandably angry that they had raced but not been paid. Second, whenever race promoters said they couldn’t afford FOCA’s terms during negotiations, we would offer to take over all the finances of the race. We proposed paying the promoter a fee to look after all the sporting aspects, including the FIA’s costs and calendar fee, while the teams assumed all the event’s financial risks. If it rained, the crowd was small and the event lost money, only the teams would suffer. The race promoters alway
s turned us down because, despite their pleas of poverty and a failure in many cases to promote Grands Prix properly, they were almost all doing well.
By the late 1970s we had pushed the prize fund to a point where a promoter finally took us up on the offer. As already noted, we found ourselves financially responsible for the 1978 German Grand Prix at Hockenheim. The organiser no longer wanted to assume the financial risk and Bernie asked the teams to participate. They refused, wanting their agreed fee no matter what happened with the race.
Yet it was quite an attractive proposition for a backer because you would know virtually straightaway, the day after the race, whether there had been a profit or a loss. And in Germany most of the tickets were sold in advance, so the receipts from the race were not at the mercy of the weather to the same degree as some other races. In the event, the backers made a profit and after such a profitable beginning, investment financing to promote the races became much easier to attract.
This same pattern was later repeated in Italy (Imola but not Monza), Brazil and other countries. Generally, those race promoters who were making good money kept the commercial risk. Others, particularly clubs for whom a Grand Prix was not part of their core business and who did not want to put their members’ funds at risk or felt they might lose money, were glad to pass it on. Each time this happened, the teams were invited to participate and they declined every opportunity.
By the end of 1977, I no longer had a team and was persuaded to take on the job of securing funding and trying to make sure the races didn’t lose money. I made a number of mistakes, particularly with the 1978 German race, the first one I did. These included infuriating the press by selling their traditional seats in the so-called Press Tribune and giving them (as I thought) better facilities. I also ordered far too many programmes – another costly but useful lesson.
