Why F1 is sitting on a timebomb of contradictions

As Formula 1 nears the end of its first year under the commercial management of Liberty Media, grand prix racing's new owner could do well to use the winter break to take stock of exactly what it is it has bought. At first glance the answer may seem straightforward enough - the rights to the world's premier motor racing series - but as Liberty digs deeper it may find it needs to redefine the constituent parts of F1.

Is it, for example, a motorised sporting series for highly skilled drivers, or is it simply a technological platform upon which motor manufacturers and component suppliers are able to demonstrate their expertise, using human guinea pigs to push the envelope? Combination of both? If so, what split?

Or is F1 an entertainment exercise? A media platform? Do not laugh - F1's holding company made its money, billions of it, off media platforms, while a raft of F1's executives were recruited from media companies. That surely tells a tale or two.

Another set of questions. What exactly is F1's target market? Where? Which gender? What age? Could it be fans sitting in stands? Migratory audience, travelling the world's circuits? Global TV audience? Online streamers, possibly? Gen X, Y or Z?

Delve deeper, and the questions become more complex. Which group, race promoters or broadcasters, constitutes F1's primary market, given that the commercial rights holder does not yet deal directly with the fanbase, save for some interaction via its official website?

Indeed, the approximate income streams of Formula One Management - the Liberty subsidiary charged with exploiting F1 - are split 40/40/20 between race promoter income/broadcast fees/hospitality, merchandising and licensing revenues, with income derived from fans being generated mainly by high-end hospitality and race programmes. That's an infinitesimal sum when measured against the greater scheme of things.

The obvious next question is, then: is Liberty's vision of whatever business it believes it has bought compatible with the aspirations of F1's teams, fans and partners, not to mention Liberty's customers as defined above?

Let us take this final point a step further: should Liberty eventually go with 'Over The Top' streaming of content via the internet, as seems highly likely given the structures and limited durations of recent broadcast contracts, then another income stream would be added. Who, then, are F1's core customers?

Equally, race promoters take many forms: Circuit of the Americas is a privately owned patch of land, with the State of Texas reimbursing a portion of taxes raised by events, Monaco is (ultimately) promoted by royalty, Singapore is a public-private partnership, as is the returning French round at Paul Ricard, while Silverstone is fronted by a club. Shanghai is fundamentally state-owned, as, essentially, is Sochi. How to treat each entity equitably?

Then, what about commercial partners, given they need to be 'sold' to? Where do they plug into things? Are they simply 'bridge and board' (trackside advertising) customers, or do truly symbiotic relationships exist? If so, where do teams fit into the equation? Are they subservient to FOM partners, or do they receive equal billing - i.e., do FOM's cameras linger longer on FOM sponsors, or should team partner logos receive representative airtime?

Finally, given the disparate nature of the teams - consisting of an exclusive brand synonymous with F1, a prestige auto brand, a mass producer of cars, a historic team-turned-supercar maker, two outfits owned by the same energy drink company, one acting as machine tool salesman, and a group of three independents whose mission is to sell space to sponsors - can they all be aligned with Liberty's visions, whatever these are?

This breakdown is crucial, for of the 10 teams, only three view F1 as being their core business. Yet the category needs to be attractive across the board and be all things to all teams, or it could find that seven choose alternate activities. Already the teams are disillusioned that FOM revenues have dropped for the first time in a decade, with many opposed to indirectly part-funding Liberty's expansion drive.

In simple terms they are Liberty's suppliers (of F1 services), yet are required to forgo a portion of their income to enable the commercial rights holder (the producer of the F1 'show') to grow its own business. As one team boss asked rhetorically recently, "In what other business do suppliers take cuts in payment to enable their customer [FOM] to grow?" Yet that, essentially, is the deal.

Should manufacturers be discouraged from developing high-tech platforms they have every reason to take their toys and play elsewhere - the next step would a rapid unravelling in interest in staging GPs

Therein lies Liberty's conundrum: how to be all things to all players, whether they be teams, broadcasters, race promoters, circuit owners, hardcore and/or emerging fans, digital consumers, sponsors and partners. Before that question can be answered, Liberty first needs to understand exactly what it has purchased. To obtain accurate answers, incisive questions need be asked, and that requires intimate knowledge of the subject.

Positioning F1 at the top of motorsport's entertainment tree diminishes its value as a technological platform, for on the one hand a manufacturer aims to dominate without distraction or mishap, whereas entertainment requires unpredictability and chaos.

Yes, engines can be dumbed down, as can tyres and aerodynamics, but that surely denigrates F1's value as tech showcase. Which is perfectly fine if that is what Liberty is after, but then the commercial rights holder should write off all hopes of meaningful manufacturer participation, and all that such involvement entails. Consider the profile and prestige Mercedes-Benz participation has given F1; consider the alternative.

Rewind: F1 conspired against the manufacturer brigade in 2008/9, and is still paying the price in terms of dropping eyeball ratings, a trend that can be traced straight back to the exits of Ford (Jaguar), Honda, BMW, Toyota, and Renault, who not only bought vast swathes of tickets and hospitality packages, but took TV advertising, billboards and merchandising areas by the mile.

Equally, to gain an idea of what dumbed down F1 would look like, imagine Formula 2 with some sort of hybrid sop and few corporate sponsors. Would punters pay to stream such races? Ask the World Endurance Championship - which for years has streamed its events and found few takers despite the presence of Porsche, Audi and Toyota. Indeed, poor ratings - Le Mans apart - (in part) led to the German manufacturers' withdrawal.

When last did F2 warrant its own prime time race broadcasts, £400 ticket prices or massive hosting fees? All these streams combine to deliver F1's £1.4billion turnover, of which 60% trickles down to teams, and without manufacturer involvement F1 would be significantly poorer.

Incidentally, during this F2 championship season past a standalone round was staged at Jerez. Footage shows whole stands to be totally empty, while the main stand is around 10% full. Equally, apart from obviously permanent billboards, the rest of the circuit is 'white' - despite pan-European TV coverage of the race. Now consider the potential popularity of F1.5.

Of course, it can be argued that fans turn out to watch superstars in action and that F2 lacks these, but invariably it is manufacturers who are able to pay their eye-watering retainers, not the independents. While F2's 'show' has generally overshadowed that of F1, it is telling that a standalone race for a category that Lewis Hamilton reckons is streets ahead of F1 on spectacle is unable to pull punters in meaningful numbers.

In F1's haste to rewrite its rules in a quest to attract new generations of fans, it seems to have overlooked that F1's independents rely on manufacturers for powertrain supplies, and should these be discouraged from developing high-tech platforms they have every reason to take their toys and play elsewhere - possibly Formula E, or even far away from motor racing. Check out how many are active in other sports, or in the arts and culture.

The next step would a rapid unravelling in race promoter interest in staging grands prix, as threatened by circuits during F1's 2009 'breakaway' period. It is all very well to bypass broadcasters and go OTT, but F1 needs somewhere to race, and no circuits equals no spectacle by which to attract Gen Z. A sure way to alienate circuit owners is to demand expensive change, yet F1 seems hell-bent on doing just that.

It was recently revealed that Ross Brawn, Liberty's managing director of sport and an experienced F1 manager at all levels, had engaged circuits about modifying their layouts to encourage overtaking. He was also investigating a move away from low-degradation asphalt as it is not conducive to tyre degradation.

While F1 has every right to make such suggestions, and circuits have every right to refuse, as Melbourne did recently - such suggestions indicate the size of the bubble within which F1 exists, for circuits exists primarily to make a profit, and hosting F1 invariably results in losses. These are subsidised by track day activities, car launches and other sporting events - that's the business model Hockenheim, owned by the local council, works to.

High-deg asphalt and track layouts tailored to F1 cars are, though, hardly conducive to the core profit-generating activities of circuits, so their owners - F1's primary customers, remember, and collectively responsible for 40% of turnover - are vehemently opposed to such suggestions, arguing that car design has greater impact on overtaking and degradation - and is cheaper to fix - than layouts and surfaces.

"If Liberty wants me to make changes, they can pay for them and indemnify me against losses, or buy the circuit outright and do what they like," said a track owner who attended the Abu Dhabi promoter meeting. He is not alone, either: another circuit owner, approached by FOM as a potential promoter, declined the offer due to the costs of required "improvements" that would impact negatively on his core business.

By the same token, to speak of expanding F1's footprint in the USA (or Asia) while existing races in those territories are still gaining traction seems somewhat counterproductive. Surely the solution is to ensure that all circuits on the calendar are operating at full potential before adding events. The previous regime did just that with Malaysia (by adding Singapore), and has now lost Sepang. Wherein lay the gains?

Make no mistake, times are hard for, and in, F1, and against that background it is surely crucial that Liberty retains its existing customer bases before hunting expensively for NextGenners. The question, though, is: does Liberty actually know exactly who its customers really are, and where they reside?

In short, at whom exactly is Liberty aiming its costly efforts? Slick market research programmes do not even begin to answer these questions.

A complex matrix is at play, with each group (and sub-group) demanding individual, equitable treatment. Therein lies the biggest challenge for Liberty going forward: how to reach F1's fans directly via OTT platforms without alienating race promoters, existing broadcasters and the majority of teams - all of whom have been loyal to F1, and can lay far more claim to its ongoing global successes than can Liberty.

How F1's new owners deal specifically with each demographic - whether race promoters, broadcasters, partners, the teams, their sponsors or, ultimately, the fans - will define Liberty's future successes, not whether grands prix are held for loud, cheap cars on circuits that have high-deg surfaces, be they in Miami or on Mars.