A blog post about Formula One is probably not something you would expect to see on here. Nor is it something that I expected to blog about. but there is something happening in Formula One that I think highlights a number of tensions that are also present in politics.
Running a Formula One team is an expensive enterprise. The top teams spend in excess of US$300 million a year running their teams. There are a number of sources of revenue available for the teams: Sponsorship, technical development, drivers who bring sponsorship (or cold hard cash) to the table. Every team uses sponsorship, but technical development that is able to be commercialised is only really available to the top teams, while pay drivers are something that only teams in the lower half of the field will entertain. The teams also get money from the Commercial Rights Holders. The way this is allocated is something of a mystery to most people.
Issues around the cost of Formula One have come to a head after two of the back marker teams, Maruissa and Caterham, both went into receivership recently. Marussia have been wound up in the last few days, but Caterham are still going, with a buyer for the company, and its Formula One race license, being sought. It is this race license that is the biggest asset either team has, and to protect it they can miss no more than three races in a row, and they have both missed two already.
The receiver, and acting Team Principal, at Caterham, Finbarr O’Connell, came up with the idea of using crowd funding to help the team raise enough money to make it to the final race of the year in Abu Dhabi in 10 days time. The goal set was £2.35mil. They have just reach 51% of their goal with three days to go.
However, there has been a rather negative response to the use of crowd funding. Christian Horner, Team Principal Redbull Racing, has called it “wrong” and for it to be “banned”. While Bernie Eccelstone, CE of Formula One Group, has called it a “begging bowl”. Christian Horner has also added:
Horner, though, says it is wrong for fans to be asked to pay the bill.
“I don’t agree with the fans having to fund a team,” he told Sky Sports News HQ.
With Bernie comparing it to a game of poker:
“If I sit in a poker game and I can’t afford to be there with the other people, I get killed and have to leave.”
However how is use of crowd funding any different, and more of a “begging bowl”, than a team going hunting for a new sponsor mid season? Or trying to sell drives in Friday practice for money? In fact what Caterham is doing is cutting out the middle men and going direct to those who already fund Formula One Teams, the fans. The only reason there is the money to run Formula One Teams is because companies see a return on their sponsorship. As well Formula One has always been about the fans, about keeping them connected to, and interested in, the sport, crowd funding just provides a direct way for the fans to get involved in supporting the teams they like.
It is not like Caterham have plans to be fully crowd funded, FinBarr O’Connell has stated:
“There has been some confusion with regard to the purpose of the Crowdfunding Project. Clearly, the plan is not to run a F1 team by using Crowdfunding but rather this funding is providing a stepping stone for the Team to a new financially sound future.
So this is just a short term measure, something to help them over a hump.
The issue that is at play here is that Bernie, Christian, and others, see the use of something new, crowd funding, as a threat to the image of Formula One. They have not taken issue with the running of pay drivers, some of who have questionable track records, nor have they taken issue with the running of pay test drivers during Free Practice One on race weekends. I assume this is because the sums involved are still staggeringly large, Vitaly Petrov brought over US$10mil in sponsorship to his team in 2012. Yet because the sums involved in crowd funding start at an eye wateringly (low) figure of £1, this can be seen as pulling out the “begging bowl”, and as damaging to the image of the sport.
The events surrounding the crowd funding drive from Caterham, and the response to it, from senior Formula One figures, and fans, highlight two issues that other industries and organisations should pay attention to. Crowd funding is a new tool in the tool box of business to help raise the capital it needs. There have been any number of products that have come to market via crowd funding, and many of the companies have gone on to develop, and sell, other products funded off the profit of the crowd funded ideas. Crowd funding is coming to be seen as a legitimate way for companies, and creatives, to raise money for their organisations.
The response form fans shows that there is a level of connection and investment in the team, people are willing to part with large sums of money, $10,000 for a nose cone, to help the team get there. It shows that even though the team may be at the back of the field, people still want to see them there. Christian and Bernie may think the fans are only interested in the teams at the front of the grid, but that is not the case. When it comes to Formula One, or political parties, where the product being sold is an idea, and a connection, crowd funding is a way to help individuals contribute in a way that is meaningful both to the individuals and to the organisation.
The other issue it highlights is that when it comes to the use of social media, to be able to draw meaningful returns from it, organisations building a community around an idea, a company, a product, or a political party, this needs to start from day one on social media. Once that is done, different approaches can be tried. There is no point in building a community that is then not able to generate a return for the organisation. In some cases that return might be providing an audience for sponsors to try and sell product to, but for others it might be offering that audience a chance to help make a meaningful contribution to the organisation.
Political parties can learn from this example. Building a sense of community can result in supporters having buy in to the organisation and being willing to contribute in ways that they might not have thought about before. But to achieve this, there is a need for calculated risks to be taken. Calculated risks should be part of a successful social media presence. If organisations play it safe, they will blend into the background and not make any gains.