Motorsports Business Forum Austin: Nick Fry

The Motorsports Business Forum holds regular events around the business of Motorsports (unsurprisingly). The latest edition was held in Austin, where there were 200+ attendees, most of them local. I went along to listen to teams and sponsors talk the business of F1, rather than the sport, which was the topic of the previous day’s FOTA Fan Forum.

First up was Nick Fry, CEO, Mercedes AMG Petronas F1 Team who talked about “The Opportunities and Challenges Facing Formula One”. Nick gave a talk and then opened the floor up for questions.

As usual, this is liveblogged…so mistakes are possible!

Motorsports Business Forum Austin

To frame things..will talk about our team, but numbers apply to front of grid. All published numbers. Team is 500+ people, You can’t buy the car, you can’t buy the major parts. the rest have to be designed and released themselves. Have to do it every year. about 4000 drawn parts every year. Have about 200 people to design, 200 to make and everyone else is indirect. Budget is quite large. Spend $200m a year, around that. as there a re so many people, the technology. the speed. start designing in July, design and dev to Christmas,when start making, ready to go in end Jan, test for a couple of months, start in Australia in march, race through to Nov in 20 locations. For those in auto industry, who may thing they take shortcuts…in Ford etc would take 3 years min, then do they cut corners…the reality is that the teams design use IBM system Petia…the same as the cars company. Runs on SAP on start to finish, same as nay big company. Pay for it…50% from partners, have a number of premium companies associated…(he named a few)…The other comes from promotion of sport. The profits are split, depends on performance..( 3 year basis). 100m+ the race, significant audience on a global basis. For major corporations…eg countries, who want to advertise globally, there is nothing like it globally. Not dissimilar to Olympics or World Cup. Significant marketing opp…it tends to be national sports for many, very little has reach globally.

LEads to first opportunity..travelling around the world…we are good at going into emerging economies early on and getting a high level of interest early. We have been adding new venues regularly. That number will continue to grow. substituting for European events. Russia, easy to see in Mexico, huge demand for races, amplifying the marketing benefit. SO an example, in India, Airtel, they decided to sponsor the one race for Mercedes. They did an ad for the sponsor, got 2.5m views of video in the 2 days. ANother thing, unique, is technology. The people who watch are interested in the tech behind the car…tech is important and what we need to do is to combine tech with entertainment. Have loyal fans…with us and for us..but to get numbers then have to make it appealing, have to get to outer areas of bullseye. The tech spins off to other others, not just auto. There are about 45k people who work in associated areas, highly paid, tech jobs, significant job.s The spinoffs are into defence, space, aerospace. THe tech on cars, the composites, the electronics, the engine, the telemetry,have done a lot of work in energy recovery…is being used to sell into lots of other areas of business. Eg train industry and fly wheels. Buses using hybrid tech. In our own case, the energy recovery system, going into the SLS Mercedes car. Next version is purely electric, all the tech developed with help of F1 team. There is a direct spin off. The F1 engine changes in 2014. going for a 1.6l and turbocharge and energy recovery, 10x power of system in cars now. Important to make tech relevant to what can be used in outside world.

Challenge. Like most sports, problem with costs. THe money is difficult to raise, Teams at back..and middle…are struggling. Need to bring down costs. The benefits of winning are huge..so people spend vast amounts of money to be successful, to get more tv and publicity. PLus making tech relevant, and FIA trying to do this. A few years ago, making engines with 21k RPM, could not find home for those engines. So things like DRS, allow overtaking, keeping excitement with passing.

Lastly, why Mercedes in F. The product development benefits. Not just the teach but the process of developing car in 6 months. Plus to sell cars, Merc successful, supply 3 teams with engines at moment, plus demonstrating the tech advance of cars and that comes through in market place. So far this year, Merc number 1 market (2 last year, after Germany). Have about 23k people in US working in it. Important that successful here, so thanks to Austin…have a great springboard for future so great business opp.

Questions.

Question: So huge amount of car experience, and yet Merc world titles are with smaller teams. Are there framework with smaller teams that make it easier?

NF: so issues that we face are similar to a big corp taking over smaller one. danger that kill golden goose with kindness. Diff to get balance with large corp given money resources and not smothering them with too much kindness and bureaucracy. THe people who are in small companies are there for a reason…the nimber, fast etc…the secret is to preserve autonomy and provide the support but let them get on with it.

Question: with quick decisions, etc, what challenges are there to managing expectations at Mercedes group level. How do you act small as part of large.

NF: the want to preserve uniqueness Bopard say have all this stuff…you take what you need but will not impose anything in you. They say have what you like, if you want to use sim tech, then do but they won’t come and tell us what to do. A difference to how Merc have behaved and other car companies. So performance is our doing and not Mercs.

Question: how do you feel about Hamilton joining you?

NF: feeling inside team was positive…we have had one of greatest drivers working with us..in age terms, then reaching end of team..to do well in f1 need to have the best..and best drivers. IN my view, Lewis, alongside Alonso, are the 2 best drivers. Vettell may be in that group and have alway had best car..and he has to prove it in my mind. Alonso done exceptional job. Lewis in category of giving him not quite the best car and can still deliver. THis has given pressure, as Ross has to provider the best car..he can win in not quite the best…nbut still have to bridge gap.

Q: (Red Mccombs) What are you concern about in a new venue.

NF: it’s all around the enthusiasm of the town. If you ask them in F1 which are the favourite, what the place, most will say Melbourne…plus Montreal. Because they are sports town,s everyone supports, there are bands, activity, people com in as great towns. The whole place gets abuzz. The circuit is important, but most important is the venue…you can normally see from early in gestation whether it will be successful..,but think Austin has got off a very good start…get reaction that people want it to succeed, they are friendly, the right kind of town…maybe theplaces we have raced in were not tourist, towns that people want to go to. Especially if embraced from business not just circuit.

Q: what happens to old cars?

NF: some go to sponsors..(as part of deal), some go to MErc). They can’t run or do anything with it, looks nice . The rest go to show cars…Will eventually go to second hand market.

Q: you mentioned the tech..can you add colour to FIA limiting driver track/accessibility and they are moving to simulations

NF: we are doing what is reflected in mainstream automotive…in Ford we made loads of prototypes, to get in plenty of experiences. Very expensive, something that car manufactures are sims. Final test to be physical, the rest on screen, rig, sim. F1 in the same direction, because it cuts costs. Have several as drive in loop simulators…a very expensive playstation on steroids. Sev million pounds. Driver sits in chassis. It moves around a little. most us has an understanding of the inputs needed. It is a rather dull job, darkened room, with screen. The driver has to believe they are in the environment, to get their brain around it. Such is the resolution. that most top teams will also run a sim in the uK at the same time, and doing resolution. Wil run sim during evening to find more info, most drivers spend lot of time driving round. a lot cheaper and many cases more accurate with other variables. That’s an areas where we and MErc work strongly together. Have fed off that to the f1 sim and vice versa

Q: How does the IP participate in funding the future car.

NF: kind of gentleman’s agreement that they don’t patent. Thor is an underlying undercurrent, about protection is not the sense of what they are trying to do. More practical, takes too long to protect,,,as teams copied in 3 races. Most races have got people employed that just look at other teams, Copying does not really work unless you understand the physics, you have to know what it is doing. IN terms of hybrid, the Williams have done great job with flywheel system on cars etc…prob is patented. There is stuff that may have a home elsewhere…

Q: you were discussing marketing opps…plus enthusiasm of city. WOuld you consider a US driver racing as part of marketing activities?

NF: we would consider any driver regardless of who they are….as long as they are a fast driver. Historically some team shave taken a driver for financial reasons and it can backfire if not successful….if took a US driver for marketing and not successful, then does not reflect well. Not on radar if can’t drive fast.

Q: when f1 started, safety not a concern. How do you find safety, does it hinder dev, or in direction, or in maintaining..

NF: the safety of everyone critical. incidents are one things and part of excitement but no one wants to see another hurt. Driver is relatively well protected..reduce whiplash, safety cell. Bigger concern is bystanders, marshalls etc, bit of wheels. Spend lots of time and energy in this. Certainly adds to cost but not inhibits..have improved a lot in last few years, lots of money. but think it is necessary. Some of the energy absorptions very interesting, going into road car. AN added dimension which is important.

Q: How many are in team that you bring?

NF: bring 65-70 people. about 40 directly involved in car, plus marketing, catering, support functions…that’;s where a lot of the expense is. Move 24 tonnes of equipment. Some of the bigger venues, eg Singapore..one of the sponsors had 400 guests…

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