Formula One: Is it Sport or Business?

Bernie Ecclestone doesn't speak a word of Italian, but he understood Enzo Ferrari perfectly. He tells the story of an early meeting in a darkened office deep inside the famous factory at Maranello when Mr. Ferrari pointed to the top of the conference table and whispered, "here is the sport." Then, Ecclestone recalls, "his finger went underneath the table and he said, 'here, here is where we do business. '"

It is more than 35 years since Ecclestone spotted the potential of Grand Prix racing to generate money. Since then, the British entrepreneur has transformed it from a fringe activity into an industry that employs thousands and entertains millions. Together with the various companies that he set up to exploit the sport, Ecclestone is rewarded by taking at least half of the revenues. To begin with, it wasn't much. But profits rose inexorably, and in March 2006 the Formula One Group was sold to a private equity firm for $1.7 billion. Not only were Ecclestone and his family the main beneficiaries of the deal, but he personally was asked to stay at his desk in the front office.

Given that there are banks and stockholders involved now, rather less of the business is done under the table than it was when Mr. Ferrari and the other F1 team owners were making deals on the basis of Mr. E's famous handshake. In the almost 20 years since Ferrari died, the ownership of more than half of the 10 teams that currently compete for the world championship has passed into the hands of major car manufacturers. And although there have been murmurings of discontent from time to time, those manufacturers believe that they get value for money from their investment. The position of Ecclestone, who turns 78 in October, has never looked stronger.

It remains to be seen, though, whether the popularity (and profits) of F1 racing will maintain the vertiginous growth seen over the past 20 years. Ecclestone undoubtedly has a golden touch when doing deals, but his promotional skills are less assured, as demonstrated by his unsuccessful attempts to do for bike racing (MotoGP) and rallying (WRC) what he has done for F1. And although he is impressively adept at selling races to governments, he evidently finds it difficult to convert F1's golden image into public popularity.

Critics suggest that he is unable, or unwilling, to delegate specialized tasks like promotions and marketing to his own employees. His operating style has always been to permit his business partners to make profits, provided that he stays in overall charge -- and that those profits never exceed his own. He has accepted the idea of building F1-themed amusement parks, with plans already underway for the first to go up in Dubai, but progress is slow. It is not difficult to imagine how horrified he would be if such a venture were to prove hugely successful.

At no time since Ecclestone started building his business in 1972 has he sought personal glorification. The car owners with whom he did business trusted him intrinsically because he was one of them, a "racer." He had raced open-wheeler cars, managed drivers, and was already a team owner himself, of the winning Brabham outfit. It would be a couple of decades before they discovered that he was taking half of the sport's earnings, but even then they bit their lips. They knew that having to make do with half of Bernie's gross was almost certainly better than pushing for 90 percent of what a less competent operator would have banked.

Unsurprisingly, not even those who have dined so well on the crumbs from Ecclestone's table are entirely happy with the faceless private equity bankers who now call the shots. Now that he's accountable to shareholders, Ecclestone cannot afford to be benevolent, to help struggling team owners and to accommodate his old friends.

Questions are also being asked about the direction the sport is taking. Some of the classic events in Europe have fallen by the wayside, in favor of races in countries that have no motorsporting tradition. In the last 10 years or so, countries like Portugal and Austria have lost their races, while Germany and Italy -- both of which used to have two GPs -- are down to one each. Two of the countries that have staged championship races since the FIA set up its world series in 1950, France and Great Britain, are in the last two years of their contracts, with not a sign of sympathy from Ecclestone.

In their place have come new venues: Malaysia, Bahrain, Turkey, China, and (this year) Singapore. These places all have two things in common: an unfamiliarity with the traditions of motorsport and autocratic governments, which are more than willing to use motorsport as balm to soothe not only their own populations but also to put a friendly face on their own administrations. It should perhaps have been no surprise in 2006 when Turkish government officials hijacked the podium ceremony in Istanbul by suddenly nominating a political accomplice, the president of the rogue northern (Turkish) "republic" of Cyprus, to present the trophies. Such is the penalty for mixing sport with politics.

Even at $50 million a pop, the cost of staging a Grand Prix is no deterrent to a regime that is prepared to use a podium ceremony for its own grubby unsporting ends. Indeed, the venues listed in the previous paragraph not only pay considerably more than established circuits for their race, but they were all encouraged to build fancy new circuits.

There is no denying these circuits are safe for the drivers and comfortable for both teams and spectators. Far more people watch F1 racing on TV than will ever pay to enter a circuit, which destroys any suggestion that the sport has become less accessible. Indeed, it is possible to argue that by allocating major international races to "new" countries, the sport's appeal is enhanced.

Some, however, would object that by moving F1 from its familiar haunts, Ecclestone may be pushing it into a dead end. While the enthusiasm of genuine fans is difficult to quench, the active life of a politician is finite. And although the commercial details of the contracts he writes are necessarily confidential, it is no secret that he demands an annual increase in the sanctioning fee of as much as 10 or even 15 percent.

Where does the U.S. stand in all this? The United States Grand Prix had been moribund for eight years when Tony George, boss of the Indianapolis Motor Speedway, bravely signed up with Ecclestone to stage an F1 race in 2000. Although a lot of work went into constructing a road circuit that incorporated part of the historic Indy oval, it was not a popular track with the drivers. The race itself survived the infamous tire scandal of 2005, but last year it was discontinued after Mr. George failed to agree terms with Ecclestone on an extension in their contract.

Happily, it is possible the U.S. race will be restored to the calendar. While spectators at the Grand Prix were greatly outnumbered by the fans, who fill the IMS for the Indy 500, the numbers were still far from shabby. Furthermore, it is understood the car manufacturers involved in F1 are anxious to return to racing in the USA -- and to Indianapolis in particular. Subject to a race sponsor being found, it is possible that the IMS will be back on the schedule as early as next year.

If nothing else, that would mark a turning point in Bernie Ecclestone's self-appointed position as the master of the F1 calendar. Having put behind him the days when he did his most important business under the table, he would surely be commended for putting sport ahead of profits.