Bernie buys F1's commercial rights for a fee

[Gerard]

Bernie Ecclestone has secured the commercial rights to F1 for 100 years.

Grand Prix boss Bernie Ecclestone has done what many in Formula 1 believe to be the deal of the century in securing the commercial rights to the sport for the next 100 years at a bargain-basement price.

To make a good week even better for Ecclestone, today’s Daily Telegraph (July 20) reports that five major manufacturers, including Ford, DaimlerChrysler and Toyota, are in talks to buy a third of his SLEC F1 business. With the deal still in its early stages, industry sources say the deal could value SLEC at £4 billion (US$6 billion).

Ecclestone recently sold 50% of SLEC to German media group EMTV and the stake targeted by the motor manufacturers is said to include part of EMTV’s share.

Ecclestone will pay the FIA, the sport’s governing body, a total of £240 million (US$360 million) for the new commercial rights contract, which starts in 2011 when his current contract runs out. First instalment is US$60 million, paid immediately, with the balance triggered by such things as a flotation of his company on the stock market – a situation made less likely by any motor manufacturer buy-in.

Ecclestone’s purchase of the rights helps resolve the FIA’s long-running dispute with the European Commission - which had claimed that F1 engaged in anti-competitive practices - by meeting the EC’s wishes that the FIA should not profit directly from the sport it administers. In turn, 69-year-old Ecclestone has recently sold the commercial rights to the World Rally Championship to Prodrive boss David Richards, thereby staving off any monopoly accusations potentially directed at him.

Some F1 teams are concerned that the deal is far too cheap, especially when compared to the US$2.4 billion recently paid by three TV companies to the English Premier League. However, the purchase of a share in SLEC by the motor manufacturers – all key players in the supply of F1 engines – makes a breakaway championship unviable.

One tangible benefit from any deal could be an end to F1’s impending engine supply crisis, since the manufacturers are likely to want to safeguard their investment by making sure the whole grid has access to a long-term engine supply.