Lotus Boss Buoyant On F1 Future

Tony Fernandes, Team Principal of the new LotusF1 team and one of the main investors in the venture through his Tune Group company, delivered the keynote address on the first day of the 2009 Motor Sport Business Forum in Monaco.

Fernandes, who is also the CEO of successful airline AirAsia, revealed new details about his team and its ambitions in Formula One. He believes that despite the recent withdrawal of manufacturers from the sport, it is a great time to be in Formula One.

He said: "We see opportunities and I think things are going the right way. Costs may be coming down but I still think it's a phenomenally successful sport. There are still lots of ways of making this a really good business, and it's a great business for other businesses to sit on as a platform."

Fernandes and his team will start with a modest budget but one he believes can deliver in this new era of Formula One.

He said: "We have a budget of £55 million this year to get the team going. That involves a lot of start-up costs. We are obviously the latest entry vis-a-vis a new team, because Sauber has come in but they've got all the infrastructure in place. We have had to build everything from scratch."

Fernandes admits he took a bit of a risk at the start of this project but this has paid off in terms of preparation for next season.

He said: "We started to build the car and bring in the people even before we had a grid slot. I told Mike Gascoigne (the team's technical director), 'if this doesn't work I'm going to have some very expensive pictures'. But that paid off so we're looking confident and we're about a week ahead of schedule for being on the grid."

Fernandes also gave further details about his team's partnership with Malaysian car manufacturer Proton, which owns the Lotus brand.

"We have a licensing agreement with Lotus owner Proton and over time that relationship will grow. Lotus will probably buy into the team at some stage. More and more technology from our side will flow into Lotus cars and we will promote the Lotus brand. I see it in time being no different from how Ferrari works."

He added: "I don't think we can claim any of the heritage but we are very clear about making sure we don't destroy any of the prestige. We have an advisory council to make sure that we protect what has been built by Colin Chapman and the people at Lotus.

"So I don't think we can claim [Lotus heritage] but we'll certainly celebrate it and work with it. We have lots of ideas. We've talked about doing something like the Goodwood Festival at this year's Malaysian Grand Prix and have lots of Lotus enthusiasts bring their cars down to Malaysia. There are lots of ways to celebrate the heritage. It's phenomenal history, a phenomenal brand. We can't claim it, but we will work with it, we'll celebrate it and we'll honour it."

And his target for the new season?

"For me, make sure I'm ahead of Richard Branson. I used to work for him, we partnered together on the airline, so I would like to see him behind me on the grid.

"We think we are going to have a very reasonable car. We know we aren't going to be competing [at the front] in year one, but it takes time and we'll have a good basis for moving forward."

Manufacturer Exodus Presents Opportunity

Following his keynote, Tony Fernandes was joined on stage by Cosworth General Manager Mark Gallagher, Mumtalakat Holdings CEO Talal Al Zain, CISCO Business Development Director Neville Wheeler and Mangrove Capital Partners partner Gerald Lopez, who is currently bidding to buy the Renault F1 team.

The recent manufacturer withdrawals from Formula One were a major talking point with most of the panel in agreement that the change represented an opportunity rather than a disadvantage for those coming into the sport.

Gerard Lopez said: "The situation is such right now that it provides an opportunity to come in at a time of change. Times of change usually provide a good entry point into a business. There is a chance to build on a platform that has to reinvent itself."

If Lopez is successful in buying the RenaultF1 team he will use it as a platform to promote other businesses.

He said: "The opportunities lie not in making money from the team but rather from using it as a business platform for other opportunities. Formula One is especially a great business-to-business platform. I've seen it turn even the most seasoned executive into a kid."

Talal al Zain agreed that the decision of Mumtalakat, the investment arm of the Kingdom of Bahrain, to buy a 30 per cent stakeholder in the McLaren Formula One team was never about the linking with a manufacturer but rather about being part of the sport itself.

He said: "Our decision to invest in McLaren was about being part of a Formula One racing team not about linking up with a manufacturer."

This is the same for most of the new teams coming into the sport. The business model for new teams has certainly improved with the introduction of Cosworth as an independent engine manufacturer. Teams can now buy engines for a fraction of the cost they were being developed previously.

Mark Gallagher said: "Whilst the manufacturers were supportive of the new teams they couldn't commit to supply deals. This is now understandable in the case of Toyota and BMW. Cosworth had to make a commitment to come into F1 and guarantee to make engines as cheap as possible. We are now supplying engines for 10 per cent of a team's budget."

Even so, all speakers were in agreement that manufacturers will return to the sport.

Lopez said: "This is not the first time manufacturers have left Formula One and I am sure others will take their place. Manufacturers are being created in new geographies. The next generation of manufacturers do not have to come from Europe."

New F1 Demands New Media

Formula One must embrace new media opportunities or risk being left behind, according to CISCO Business Development Director Neville Wheeler, speaking at the Motor Sport Business Forum.

He said: "Where rights to content have been tightly controlled and perhaps based on the broadcast model, there is a major challenge for the stakeholder. We all know the pace of change is so fast that unless you are prepared to break away from the shackles of the old way of doing things you are often left behind and you will find that the passionate fans will seek out other ways of viewing your content."

Wheeler was critical of the way some sports rights-holders are spending all their time protecting what they have rather than branching into new areas.

He added: "The smart organizations are embracing new opportunities to try to monetize new media rights rather than to try and create a walled garden to protect them for as long as possible. We have to get to a point where the new media is a key component to the way the sport is delivered to the global audience. If we can't get to that point then advertisers, sponsors, suppliers and teams will not be able to monetize their investment in the way they would like."

Gerard Lopez, who was a founding investor in Skype, agreed. He said: "Current broadcasting contracts are based on the ways people watched television 20 years ago."

He added: "We're really interested in something we call 'Freemium'. This stands for free and premium. You give free content, via the internet, to as many people as possible and you make it important to them to buy additional content. The challenge is not figuring out what you can give away for free but what value you can provide on top of that. That is the challenge for today's rights-holders."


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