Question: What record did F1 chief Bernie Ecclestone break in real estate?
(You can find the answer at the end of this article.)


Today, disagreements over money are almost as common in sports as practice sessions and games. Most of the time, the disputes are relatively harmless, and involve a player that is demanding more money from his team.


One battle over cash wasn’t so harmless and almost led to the breakup of a major pro racing circuit. Formula 1 recently dodged a bullet when warring factions reached a deal that essentially put the brakes on a secessionist movement. We'll take a look at what nearly caused a destructive rift in Formula One racing and how much money is up for grabs.


All amounts of money are in U.S. dollars.

The future of F1 has gone from questionable to relatively secure; that's because racing chief Bernie Ecclestone signed an agreement with several carmakers that threatened to form a rival racing series in 2008 if he didn't give them more money.


After years of negotiation, Ecclestone and the Grand Prix Manufacturers' Association (GPMA) signed a document called a memorandum of understanding. The terms of the agreement have not yet been revealed; however, published reports have speculated that teams will receive 50% of the sport's revenues, which amounts to nearly $1 billion. Under an agreement signed in 1997, teams shared about a quarter of F1's income.


Renault, BMW, Honda, Toyota, and DaimlerChrysler's Mercedes had to settle for a little less than what they wanted, which was initially 60% of the earnings, starting in 2008.


Ron Dennis of McLaren said there's still a long way to go, but the memorandum is essential to a new Concorde Agreement, which replaces the one expiring in 2007. This agreement would spell out the payments for teams, the International Automobile Federation (FIA) -- the sport's governing body, and Ecclestone, who holds commercial rights to the sport.


Now that both sides have put pen to paper on this crucial memo, teams are going full throttle, pouring resources into their F1 programs. For example, BMW plans to increase its team’s workforce from 300 to more than 400 by next year at its facility near Zurich, Switzerland.


The GPMA contingent has joined Ferrari, Williams, Midland, Super Aguri, Toro Rosso, and Red Bull, which already signed on with Ecclestone.

Follow up:

The man who, for several years, had been the No. 1 enemy of GPMA has been involved with racing longer than many of us have been alive.


Ecclestone's first racing experience was back in the early 1950s in the Formula 3 circuit. He gave up driving after an accident in 1951. In 1957, he returned to the sport as a driver manager after he made a fortune in real estate and loan financing.


The politics behind the F1 reads almost as well has a soap opera script


that gave him control over Grand Prix. Ecclestone advocated for team control of the sport, forming the Formula One Constructors Association, a group that gained the right to negotiate television contracts for F1.





Later, Ecclestone established Formula One Promotions and Administration (FOPA), creating a sweet deal for himself. Teams would get a little less than half of revenues, while 30% went to FIA, and Ecclestone received 23%. In return, Ecclestone's FOPA outfit put up the prize money.


By the 1990s, he had climbed the ladder from steering cars to navigating an entire sport. As the owner of Formula One Holdings, Ecclestone controlled almost every part of F1, all the while adding to his fortune. According to published reports, he paid himself about $100 million from 1995 to 1996. Before the new millennium started, his fortune was an estimated $3.7 billion. In October 2004, ESPN.com reported the sport's yearly take was about $810 million.


A group of disgruntled automakers felt Ecclestone was making too much money, and they wanted a bigger slice of the pie. Several years ago, the Grand Prix World Championship (GPWC) consortium formed and threatened to form its own series in 2007; however, the carmakers threw it in reverse after reaching a preliminary deal with Ecclestone near the end of 2003. The peace didn't last long, as GPWC members accused F1 of not living up to the agreement.


With a few different members but the same overall goal, this organization morphed into GPMA. Ferrari was part of GPWC before breaking ranks with the alliance and signing on with Ecclestone through 2012. Ford, the parent company of Jaguar, was also part of the group but pulled out of F1 altogether and sold the team's assets to Red Bull.

The complex set of transactions in recent years to buy and sell F1 racing has been a virtual shell game. F1 has changed hands several times, yet a power-hungry Ecclestone is still calling the shots. Consider that in 2000, he agreed to pay a sum of $360 million for an extension on the commercial rights, which he already had for the next 10 years -- the extension was for an additional 100 years.


That same year, EMTV -- a business owned by German media moguls with valuable television rights -- bought a 50% stake in F1 companies owned by an Ecclestone family trust. However, EMTV was in debt up the ying-yang and its owners had to pay heavy fines for misleading investors with bogus profit forecasts.


Temporary peace has been made during a transitional period in the sport


In another ill-fated deal, F1 was sold to the German media group Kirch, which folded a year later. Kirch exercised a put option, and wound up with 75 percent of F1, which fell into the hands of creditor banks after the company went under.


Those banks and Ecclestone kept things going before Alpha Topco bought F1. Alpha Topco’s controlling stake is owned by CVC Capital Partners and a list of shareholders that includes Bambino Holdings, Ecclestone, and the F1 management team. Published reports have speculated that an initial public offering is not far off.

For years, Michael Schumacher has been one of the sport's dominant forces on the track. His days behind the wheel could be numbered, as many people expect him to retire soon. If he decides to hang on, it probably won't be because he's hurting for money.


According to Forbes.com, he made $60 million in a 12-month period that ended in June 2005, which was considered a slow year for him.


New F1 regulations have changed the sport: Michael Schumacher, who won 12 of his first 13 races in 2004, has relinquished his lead and sat in eighth place half way through the 2006 season. Schumacher’s income has also declined since he passed on endorsements and his licensing business slowed.


As Schumacher's star has faded somewhat, Fernando Alonso has emerged to the forefront, and Ecclestone wants him to be a more public face for the sport. In fact, Ecclestone has called out Alonso for not making an effort to bring the sport to the people.


We could say both sides have agreed to disagree on this one. Alonso doesn't believe he's required to do anything more than his Renault contract requires.

Even so, the future looks bright for F1. For now, there is peace between Ecclestone and the group of carmakers that was poised to form a breakaway series. Once a new Concorde Agreement is in place, and the carmakers are getting payouts they deem acceptable, F1 should be able to avoid the ugly split we've seen in American open-wheel racing with Champ Cars and the Indy Racing League competing for fans and money.


Answer: In 2004, Ecclestone sold his London home for $128 million. It was the most expensive house ever sold.








Source: Steve Seepersaud on Ask Men