Formula 1 and other stuff

Lotus Racing announced a partnership with CNN today. As ever, that weasel word ‘partner’ leads one to ponder how much (if any) money is involved, and what benefits eventuate for either party.

Launched by media mogul Ted Turner in 1980, the Cable News Network leapt to international prominence during the first Gulf War by dint of being in the right place at the right time: it had a clutch of reporters in Iraq when hostilities broke out. The 24-hour news cycle we take for granted today truly came of age as Bernard Shaw (no relation to the author of Pygmalion) reported live on the bombing of Baghdad.

The competition between these rolling news networks is fierce, and, as you might expect, coverage is costly, especially since the big guns now operate locally tailored programming on a global basis – usually aimed at a business audience. Increasingly these networks – even BBC World – are turning to commercial sponsorship of their news broadcasts. The Lotus release aligns its ‘partnership’ with CNN’s ‘Partner Solutions Group’ (I feel a submission to Private Eye coming on) under the leadership of Rani Raad, the senior vice president International Advertising Sales, who had this to say:

The combination of two such iconic and aspirational global brands fits perfectly with CNN International’s worldwide reach and brand positioning. This unique partnership with Lotus Racing takes CNN International into a new era of marketing and promotions and puts us in front of a worldwide audience of millions.

Raad is credited with engineering a number of high-profile programme sponsorships for CNN International. Most recently he has been involved in a deal for the Earth’s Frontiers environmental series to be sponsored by Masdar, a renewable energies company wholly owned by Mubadala, the sovereign wealth fund of Abu Dhabi (which, coincidentally, has a stake in Ferrari as well as being one of the driving forces behind the Abu Dhabi GP). CNN is also launching a broadcast facility in the emirate.

Some readers may be uncomfortable with corporate sponsorship of news broadcasting, but this is the direction we’re heading in as conventional ad revenues decline. There are governments and sovereign wealth funds out there with pots of money that they wish to spend on promoting their countries as business destinations. The Lotus connection will engender a lot of attention in the kind of emerging markets CNN is aiming for.

Earlier this year I went over to the World Touring Car Championship race at Porto. I caught up with a driver who I haven’t seen in years, and amongst other things he told me that in recent months he’d been snapping up repossessed houses for around 50 per cent of the market rate.

“The banks are desperate to get rid of them,” he said, “because they’re desperate for cash. They need liquidity more than they need the paper value of the asset.”

I pointed out that property values could fall further in the short term.

“Doesn’t matter,” he replied. “The opportunity is now. They aren’t thinking about the future, because it’s less important to them than shareholder value – they don’t want a rout next time they release some figures. When the panic’s over the bargains will be gone.”

Similar thoughts have been playing through the minds of the investors who are presently jockeying to pick up the Renault F1 team, should Renault decide to sell (I was told last week that the decision is still pending). As the weakened manufacturers have fled the sport to focus on shoring up their balance sheets, the better to defend their share prices, visionary entrepreneurs have sniffed opportunities; although sometimes, as in the case of Qadbak, the difference between entrepreneur and huckster isn’t immediately obvious.

Yesterday’s news that Lloyds Development Capital has taken a stake in the Virgin F1 team underlines the fact that the panic is now over in the banking sector. It was also a nimble piece of news management (hardly surprising, given that Virgin F1’s comms chief used to work at Honda and therefore knows a thing or two about firefighting). Banks and bankers are still reviled and reports of them spending money – especially if, like Lloyds, they’ve been bailed out by the British taxpayer – may not be greeted warmly. The timing of the announcement makes it a small element in the hierarchy of today’s launch.

This is a good time to be investing in Formula 1. The background mood of optimism in the market is characterised by the price of F1’s debt, which is currently trading in the region of 90 pence in the pound. Back in July, at the height of the FOTA breakaway threat, it was around 50 pence in the pound.

In buying Brawn, Mercedes have obtained a championship-winning F1 team for far less than British American Tobacco and Honda paid for pretty much the same outfit when it was still a midfielder. They will now derive all the benefits from having their name above the door while spending far less – partly thanks to the resource restriction agreement. Dr Dieter Zetsche, Mercedes’ chairman, has claimed that from 2011 the annual budget will be a quarter of what it used to be.

So the recent talk about Anthony Hamilton throwing his hat into the ring with Renault F1 may not be too hard to believe. After all, as my WTCC snout pointed out, if you’ve got cash these days then why leave it buried under the Swiss Alps when there are bargains to be had?