The F1 mindset that is frustrating its owners

In the world of Formula 1 there's nowhere to hide. Every lap time, every sector time, is there to be analysed and TV cameras catch every mistake. The performances of teams and drivers are ranked every two weeks - you're only ever as good as your last race.

And now Liberty Media faces a similar spotlight as its stewardship of the F1 business is judged.

Every three months it's obliged to publish F1's financial numbers for the preceding quarter, with an explanation of what they represent. As in the Bernie Ecclestone era, when they didn't reach the public domain, those numbers are of much interest to the teams, for whom they provide a clear indication of their future share of F1's revenues. But now that F1 is listed on the New York Stock Exchange, they are also carefully scrutinised by investors and Wall Street analysts.

That information feeds into the share price of FWONK, the shorthand stock listing for F1, which in turn provides a minute by minute barometer of how the financial world sees Liberty's performance. And in recent months, that price has shown a downward trend.

That is a source of some frustration to Liberty boss Greg Maffei, F1 CEO Chase Carey and their colleagues. Much like a team that has an ambitious new owner and has hired a new technical director, they have made clear from the start that this is a long-term project, and that they shouldn't be judged on the first couple of years. There is much work to be done and investment to be made. It's all about 2021 and beyond, when we'll have new rules and a new financial structure that is Liberty's, not Ecclestone's.

The problem is that teams are trying to plan their budgets, and investors have plenty of other places to put their money. It's inevitable that the numbers have an impact on confidence and that in some areas there's a little impatience.

And the elephant in the room is the lack of a new Concorde Agreement. Until that's signed off, a business that cost Liberty billions will in theory be pretty much worthless as of January 1 2021. If you are a shareholder, that knowledge might make you a little nervous...

The good news for Liberty is that the numbers published last week, for July-September, showed an upturn on the previous year. But that positive data had to be qualified. Most businesses face a seasonal element - this time of year is pretty good for turkey farmers, for example. In F1's case the financial numbers are directly related to the number of races that take place in each quarter.

It's not just race hosting fees being allocated to the period in which the event is held, but many other elements of income and expenditure are also tied in to when the races take place.

Comparing consecutive quarters is a fruitless task - for example, January-March typically includes just one race, in Australia. More importantly, the year-on-year quarter comparisons are not straightforward, and last week Liberty had to explain that July-September 2018 included two more races relative to '17, and that boosted the income figures.

Liberty has to keep convincing the people that matter that it is playing a long game, and everyone should be patient

Obviously the key trend is measured over the whole year, and when it comes, the January-December comparison will be what counts, especially in terms of the future income for the teams. Yet those numbers won't reflect deals that F1 concluded or extended in 2018, and that won't generate returns until '19 and beyond. In other words there's a delayed reaction to what Liberty has flagged as positive developments.

All it can do in the meantime is signal that those deals have been done. It was surely no coincidence that a 2020 Vietnam Grand Prix was announced just a day before the third-quarter financial results were published. With the plans for Miami in limbo, the unveiling of the current management's first new race, even with no income to be derived from it for a couple of years, was an important victory.

Nevertheless, the teams are getting impatient and they want to see more money coming into the pot. Carey and co were given food for thought when the bosses of all 10 teams held a meeting at Suzuka. Ostensibly the subject was improving the show, but it was not hard to imagine that their conversation strayed into the bigger commercial picture.

Carey responded by calling them into a meeting with him the following day, and those chats have been repeated in subsequent races, indicating there's a realisation that progress has to be made.

There was a further twist in Brazil last weekend when at one stage the three big team players - represented by Maurizio Arrivabene, Toto Wolff and Christian Horner - were seen in conference at Ferrari.

At exactly the same time the bosses of the other teams (without Horner's Toro Rosso ally Franz Tost) were busy in their own meeting in the Haas hospitality (pictured) at the other end of the paddock. The class divide, between the financial haves and have-nots, was clear for all to see.

It's against that complicated background that Liberty has to keep convincing the people that matter that it is playing a long game and everyone should be patient. Liberty boss Maffei, who also has overall responsibility for other parts of the company's business, knows he has to keep up a positive front.

"F1 is in some ways a building story," he said in a phone chat with Wall Street insiders last week. "In that we knew when we purchased it that there would be efforts that needed to be done, investments to be made, and head count investments to be made, in a lot of areas where there was no personnel, we knew that some of these cycles, like ramping up OTT [F1 TV streaming], would take longer.

"Where are we going to be in three to four years? Not three months" Chase Carey

"I think most of them are coming to pass. I think the fundamental thesis is there.

"There's probably some overhang around the stock and the Concorde Agreement and the perception of uncertainty, that's not positive on what it could trade at. We remain very bullish about the direction of the business."

Intriguingly, Maffei (pictured below) acknowledged that, to some extent, the honeymoon is over and that promises of results down the line might not be enough to keep Wall Street onside.

"The market gave us a lot of credit right out of the blocks, we appreciate that," he said. "But sometimes the market can also have 'immediate gratification syndrome'. We have gone and laid the foundations of a bunch of things, including hiring, and building out substantial capabilities.

"We've absorbed places where the business may have been ahead of itself, for example particularly with promoters adjusting to make that a better experience, and we've done things to set the business right for the longer term.

"We've cleaned up the balance sheet, we've driven a lot more flexibility, and the asset that we bought is the asset that we wanted. And we think we're building a seminal sport that's going to be critical to viewers and Liberty for the long term.

"Could that happen faster? Always. Would I wish it could happen faster? I'm sure Chase wishes it more than I do, but I'm very comfortable that we're headed in the right direction."

Inevitably, Carey stresses that it's all about the long term and he's clearly a little frustrated that he has to keep repeating that message.

"We tried to be clear about 2017 and '18, what were our priorities," he noted when asked about progress during the investors' call. "And in some ways people always think once you've said you're going to do something, three months later why isn't it done?

"I realise that the market wants to gravitate to the short-term quarter. Not that we ignore it, but we've tried to be as clear as we can that our priorities are, I've said from the get go, where are we going to be in 2020? Where are we going to be in three to four years? Not three months.

"Realistically, it takes time to build. What we came into is sort of an organisation start-up and a business turnaround. Those things don't happen overnight and whatever expectations were in there in the short term, our focus has been building for 2021."

That building theme is a recurring one. Asked if we will start to see results in 2019, he repeated that it would still be too early to expect too much.

"Where we're at is really building or in some sense rebuilding F1," he said. "We do expect 2019 to be a step forward. 2017 and '18 we described going in, it was foundation building, and we expect '20 and '21 to also be steps forward. We feel pretty good about where we are.

"There are a lot of plans we have in place. We've talked about things like the US and China that are fairly further down the road. OTT is certainly going to be an early stage product next year. Our priority for this business is going to continue to be where are we going to be in three years, and not three months, and not get sucked into trying to prioritise the short-term over the long-term."

The key to the future remains the Concorde Agreement. In Bahrain back in April Carey first outlined in detail to the teams how Liberty saw the commercial future, with a focus on a more even distribution of revenues, and there was a generally positive reaction from the teams that are hoping to get a bigger share.

"If all these changes are for 2021 there isn't a pressure point to say it has to get done by December 31 2018" Chase Carey

Since then negotiations have ticked along quietly in the background and little has been said in public, which is how Carey prefers it.

"We're making progress regarding the broader set of changes to cost structures, revenue distribution, regulations and governance," he noted. "We're in constant constructive discussions with the teams, and at the end of the day, our interests are aligned. We agree on the long-term objectives and are working towards finalising the details for the 2021 season."

The problem is a general lack of urgency in a sporting category where the focus is usually on the next race. Earlier this year we saw what can be achieved in the face of a deadline when F1, the FIA and (some) teams fast-tracked through the new 2019 aero rules (pictured below, in testing this summer) just before the cut-off for rule changes. In that case there was a shared desire to improve overtaking and the on-track show. When it comes to agreeing to the money side, goals are different and the teams are not in a hurry.

"We've told them our goals in terms of targets and timeline," said Carey when pressed on Concorde timing. "I'd rather get it done sooner than later. The challenge is everything we're talking about is effective in 2021, and usually getting things done is helped by having a deadline that drives that.

"Obviously, if all these changes are for 2021 everybody would like to have it done, but there isn't something that creates a pressure point to say it has to get done by December 31 2018. I'd like to have it done just because I think it's healthy for us to be focusing on the future.

"We have targets internally, but I don't think it's constructive for us to try to put out externally target dates that create a different dynamic around those discussions.

"I think the discussions have been good, the discussions have been helpful, and the best discussions are the ones that we have with the 10 teams as partners. They're ongoing and we feel good about that process, and we'll bring it to the conclusion in the right way, hopefully expeditiously, but we're not going to put out deadlines publicly. I don't feel that helps the process."

The experience of Force India stands as a case study for what Liberty is trying to achieve. Its precarious situation in July, despite being the fourth best team for the two previous years, showed how the revenue/costs equation has got out of balance for teams.

"It probably reinforces what we've been saying," said Carey when asked about Force India's impact. "That the initiatives we've proposed and are discussing with the teams really have two goals: one is to make the sport better, improve competition action; the other is to make it a healthier business model for everybody.

"Today the business model is not what it can and should be. I do think we need to address revenues and costs, and the teams agree with that. The details are always going to require hard-working compromise to define the right ones, because there are 10 different perspectives, there isn't one on the details. I think everyone agrees on the goals.

"Dealing with things like cost is actually not compromising the quality of the teams, the quality of the competition - I think it's actually enhancing it. It's just breaking old habits and recognising where people are today to get there."

It's clear that there's some frustration in the Liberty camp, as dealing with those habits and getting all the teams aligned is a bit like herding cats. And meanwhile the clock is ticking towards 2021 - and the next few months could have a crucial impact.