What F1 can learn from Manchester United

The passing last week of an 85-year-old American watch-tinkerer-turned-investor is unlikely to have registered on the radars of most Formula 1 fans unless their sporting interests are split between two teams of eleven players knocking about a ball, and eleven racing teams, each entering two drivers.

However, perusal of obituaries published in the wake of the death of Malcolm Glazer (d. May 28, 2014), president of First Allied Corporation and owner of various sports properties - including Manchester United - provides a fascinating study in parallels between the approach adopted by the club and that of CVC Capital Partners, holder of F1's commercial rights lease via Formula One Management.

True, there exists a raft of differences between the world's most valuable football club (at £2.4bn) and the globe's largest continuous sporting block, but the similarities, particularly with regard to their respective commercial philosophies, are such that the current custodians of F1 could do well to study Man U's recent humiliating fall from grace.

Hopefully this will lead the directors of FOM, itself a subsidiary of CVC's Delta Topco, just as Man U is controlled by Red Football Shareholder Limited, to avoid the pitfalls that have seen the football club spectacularly drop from top of the pops to laughing stock in one uneasy move, in the process incurring the wrath of its legions of fans across the world.

While the F1 world was shocked when an investment fund purchased the rights with the full acquiescence of an FIA then presided over by Max Mosley, there were a number of precedents, including an initial listing of the football club on London's stock exchange back in 1991, while in the USA systematic profit-seeking from sports rights had long been the name of many games.

America's open-wheel series CART, for example, listed (disastrously) in 1998, filing for bankruptcy just five years on. CVC had experienced the investment opportunities afforded by sport via MotoGP, having bought into Dorna, commercial rights holder of the two-wheel series, at the time CART was preparing its listing.

However, when CVC was offered the majority rights to F1 for, incredibly, over 100 years at 20 per cent of their intrinsic value by F1 tsar Bernie Ecclestone, who initially seized the 10-year rights before Mosley's administration agreed to extend the deal ten-fold at no extra cost for his friend of 30 years, the investment fund quickly agreed to drop its interests in MotoGP to comply with the EU's anti-monopolistic directives, still netting six times the initial outlay on its 71 per cent holding over an eight-year period.

Bernie Ecclestone © LAT

Glazer had, though, stumped both CART and CVC, with his first foray into sport coming four years earlier when he unexpectedly outbid all suitors for the NFL's Tampa Bay Buccaneers franchise before shifting focus to Old Trafford in 2005.

Clearly the appetites of Glazer and CVC for big sport's paydays were whetted by their previous experiences of ballooning TV revenues and event-hosting income, sale of strip, and high-end hospitality, and thus they moved upmarket.

Their approaches were identical: both loaded their new-found acquisitions, purchased under controversial circumstances from warring owners, with initial debts running into well over a billion dollars. Indeed, eight years on the debt mountains have still not been halved, the effects of servicing the respective loans continuing to blight investment.

Such are the annual repayments that development is seriously hampered by the outward flow of tens of millions annually - and is unlikely to change before, at least, 2017. A feature of the ownerships has been the continuous restructuring of debt, none of which appeased their fan bases, who once willingly shelled out in support of their sports, but now baulk at the outrageous charges levied by profiteering owners.

Another common factor is that the two entities are willing to travel to virgin pastures in search of ever-faster bucks, regardless. Where Man Utd recently signed up Aeroflot as airline partner, F1 makes it debut in Russia this October. A host of Asian countries loom large in the future of both, with China enjoying the highest profile of all, commercially and as host for events.

Plans to list on the Singapore Stock Exchange were simultaneously announced in 2011, with both Asian IPOs ultimately being aborted. However, Man Utd went public in New York. Result? Shares originally set at $16-$20 were drastically cut at debut in August 2012 following negative Wall Street comments and Facebook's disappointing listing.

The social media site's performance was forwarded by CVC as (primary) reason for aborting - although in truth investor confidence in FOM was never high, particularly after CEO Bernie Ecclestone found himself party to various legal travails. Still, it seems someone tracked Man Utd's IPO performance...

Momentum accumulated over many seasons meant both properties maintained their sporting and commercial positions despite the anger of fans and stakeholders, although the tide began turning for Man U when it failed to invest in new players, simultaneously handing over management to David Moyes upon the retirement of Sir Alex Ferguson - at the helm from 1986 to 2013 - who was said to have "the winning software in his head".

Such has been the dismal performance of Man Utd that its 'home' strike rate halved from 77 per cent over 15 years (and nine in 10 games over the past five seasons) to 40 per cent. Moyes is gone, his shoes (temporarily) filled by star former player Ryan Giggs before big-name coach Louis van Gaal takes over this summer.

The net result is that Man Utd not only failed to defend its Premier League title, but did not qualify for the UEFA Champions League for the first time in 20 years. The club also failed to qualify for the Europa League, marking the first time Old Trafford players failed to qualify for European competition in a quarter of a century.

If the foregoing sounds eerily familiar, so it should: FOM has made only limited long-term investment in F1, and then only where market demands for such as HD TV dictated, while totally neglecting the new-media channels that are crucial to attracting younger audiences. Any wonder live and TV audiences are plummeting across the globe (an estimated 30 per cent over the past five years for the latter).

F1 TV audiences are plummeting © LAT

Ecclestone is 83, having led the sport since 1982 - five years longer than Ferguson's reign - and is fighting for his reputation in a Munich courtroom. In a neat twist, his anointed successor is said to be star team boss Christian Horner, and while FOM's offices feature rows of filing cabinets containing contracts upon agreements, in real terms the game plan is all "in Bernie's head".

How to prise open that information before it's too late, either through nature or legal judgment? As CVC studied Man Utd's IPO performance, so it would do well to note the club's recent fate...

While they are scouring Man Utd's financial results, CVC may like to reflect on the TV and sanction fee payments - the footballing equivalent of F1's so-called "Bernie Money" - made to all 20 teams playing in English football's 2013 Premier League.

This column has previously compared Premier League (PL) club revenues versus F1 team income, but with the latest PL monies now a matter of public record, and with frustrated sources providing this writer with F1's latest (secret) payouts, a revisit is timely.

The 20 PL teams shared £1.56bn between them, with Liverpool topping the log on £98m and Manchester City (note: not United) - incidentally fined a record £50m for breaching the sport's Financial Fair Play regulations, the equivalent of F1's contentious Resource Restriction Agreement - placing runner-up in the stakes on £96.5m and Chelsea third on £94.1m. Sixth was Manchester United on £89m, with Stoke City on £75m.

Saliently Cardiff City, which placed 20th, received £62m, providing for a top-to-bottom spread of approximately 1.5. Compare this with F1's 2013 "Bernie Money" payouts:

F1 2013 payouts  - £m

Ferrari         99.6
RBR             97.2
McLaren         57.1
Mercedes        55.2
Lotus           39.0
Force India     35.4
Sauber          32.2
Williams        33.6
STR             30.0
Caterham        18.6
Marussia        7.2

Total distributed: £506m, of underlying revenues estimated at £800m, with CVC pocketing the rest.

More saliently, the top-to-bottom split runs in at 13.8:1; i.e. where in the PL the top team earned 1.5 times the bottom (20th) team's income, in F1 the top dog (horse?) took home 14 times more than the last, 11th placed team. Any wonder F1 experiences such massive disparity?

Football has a ready explanation: after West Ham lost 3-1 to Manchester United last winter, its dogmatic manager Sam Allardyce came up with a straightforward reason.

"Where you actually finish in the league depends on the money you've spent," he said. "It's a statistical fact, that."

As they say, lies and statistics...