Business of Motorsport for August 12, 2022-Lessons From the Piranha Club

A few weeks ago, the Business of Motorsport brought you Tales from the Piranha Club. This week starts off with a few lessons from the same infamous “Piranha Club” where tales of competing contracts, broken promises and midnight deadlines abound. I also look at F1’s record second quarter results, Supercars boardroom news, Formula E’s formula for recovery, the future of motorsport sponsorship and more. There is also a brilliant marketing scheme that was born from an on-track accident, how various teams are expanding and much more. Its business news racers can use.

Motorsport Industry News

Contract Law 101 or the Piranha Club in Action?

I am not sure if motorsport right now is the best place to demonstrate contract law at work or the worst. While McLaren and Rosenqvist explain their contract situation, the whole Piatstri situation with Alpine is getting more convoluted by the hour. Of course, I am not privy to any contract details but needless to say, there is a serious difference of opinion between Alpine and Oscar Piastri’s management team. While Rosenqvist has a solid contract (although for which McLaren team he will be racing is still not clear), Racing News 365 reveals that that Piastri’s contract was between Piastri and Alpine’s Driver Academy, rather than the F1 team with all the implications that involves. While all this carries implications of risk for Piastri, his management team feel pretty confident in their position. Alpine on the other hand, have indicated that they are willing to take Piastri to court for compensation so clearly there is a difference of opinion on the validity of his contract.

Another wrinkle to consider is that some are reporting that both contracts are valid (assuming Piastri has signed for McLaren), but I find that to be dubious as clearly there would have to be a conflict and therefore a conflict resolution clause should be in at least one of those contracts. Yet, just in case, they say that the door is still open for Piastri at Alpine despite the dispute.

And what about that empty seat at Alpine if in fact Piastri is in the free and clear to depart? Well, Pierre Gasly’s name has been mentioned as being a potential solution but Red Bull advisor Dr Helmut Marko says that there is no clause in Pierre Gasly’s contract that allows him to leave AlphaTauri at the end of 2022. “There is no exit clause [for] Gasly,” Marko told Sport1. “There was none before the summer break and there will be none after the summer break.”

With all these Machiavellian machinations, you almost wonder if there are some in F1 plotting against Alpine. Alpine team boss Otmar Szafnauer would not be surprised. “But this is Formula 1 and maybe in a couple of years someone says that they have evidence of shared information, I would not be surprised. I always tell everyone that in Formula 1 you have to act as if everyone knows everything. That there are no secrets in these things. When you ask someone not to say anything, they act like everyone knows. That’s how I’ve run my business in Formula 1 for 25 years. And if this has happened, you should not be surprised.”

Adam Cooper at Motorsport Magazine does a great deep dive on the Piastri contract situation in Bitten by F1’s Piranha Club: How Alpine was outplayed in Piastri saga. It is for this reason that the FIA created the Contract Recognition Board but this was a result of yet another contract dispute involving then rookie Michael Schumacher.

If you have followed motorsport and especially Formula One for any length of time, you will be aware of the infamous “Schumacher Affair” which gave birth to both the name The Piranha Club as well as the aforementioned Contract Recognition Board. GiveMeSport has a good summary of how that contract fiasco evolved, but it essentially revolved around the change of one word in the letter of intent that Schumacher had signed with Jordan after the Belgian Grand Prix. Schumacher, represented by the IMG group, had changed the letter of intent from: “We will sign ‘the’ contract in seven days” to “We will sign ‘a’ contract in seven days.” That contract turned out not to be with Jordan but with Benetton. After Eddie Jordan realized what had happened, then McLaren boss Ron Dennis whispered to him “Welcome to the Piranha Club.”

Now some will look at the Schumacher affair or the current Piastri dust-up as a lack of loyalty to a team that took a chance on a driver. Others will look at it as one team not being sharp enough to protect their interests while another team just took advantage of someone dropping the ball. Either way, it demonstrates how important it is to thoroughly review any contract with competent legal counsel and not be pressured into signing anything (signing under duress as they say in law). In both cases, time was of the essence and the pressure of time probably led some to make decisions that they clearly regret.

These are just two lessons from the Piranha Club. Always stay sharp and and watch out out for snapping teeth, just in case.

Formula 1

• In their latest earnings report, Liberty Media have announced a 49% increase in revenues in the second quarter of 2022 compared to the previous year. “Throughout the first half of the 2022 season, F1 has experienced record attendance in both grandstands and the Paddock Club.” Joseph Pompliano at Huddle Up breaks down the numbers while David Hill at the Sports Business Journal explains what is driving F1’s popularity.

• As the FIA is set to vote in the new F1 power unit rules for 2026, there are some concerns that the initially proposed rules have been watered down to favor the current manufacturers to the disadvantage of newcomers. FIA President Mohammed Ben Sulayem refutes this and says that the new rules “allows for new entrants and even more competition.” This is important as both Porsche and Audi have only conditionally agreed to enter F1 as they still want to see the final rules and everybody from Stefano Domenicali to Toto Wolff believe that the entrance of these two manufactures are critical for F1. As for a potential Andretti entry being critical to F1? According to Alfa Romeo team principal Frederic Vasseur, not so much.

• Liberty Media plans to use their new Formula 1 facility year-round. “Our goal was to have a facility which is not only magnificent for the race but has the opportunity to have ongoing activations and events, even when the race is not underway,” Greg Maffei, CEO of F1 parent Liberty Media, told investors.

• With glitzy new events in Miami and Las Vegas coming onto the schedule, Monaco’s once unassailable position as the glamour event on the F1 calendar is coming under threat. So much so that the Prince Albert of Monaco is getting involved in order to keep F1 Monaco Grand Prix alive.

• Finally, the Aston Martin Formula One team are set to allow visitors to their online store to use cryptocurrency as a form of payment, as part of joint endeavor with partners Crypto.com and Cube. “We are constantly exploring the digital landscape, so it’s hugely satisfying to be able to take this step into the crypto payment world with both Crypto.com and Cube,” concluded Matt Chapman, head of licensing and merchandise at AMF1. “We really want to be able to provide our fans and customers with every possible convenience in terms of their user journey – and adopting a cryptocurrency payment option felt like a natural next step.

General Motorsport Industry News

• If you thought that the Pirahna Club was restricted just to Formula 1 you would be wrong as the Alex Palou vs Chip Ganassi Racing legal drama is heeding into its next phase. Assuming that the mediation session scheduled for August 10th did not resolve anything, Racer has the schedule that the parties will be following in the weeks ahead. This is also assuming that Ganassi’s lawyers are not successful in seeking to accelerate the lawsuit through its filings of a Motion For Prompt Status and Scheduling Conference, Request For Prompt Hearing On Preliminary Injunction, and Motion For Expedited Discovery which as of this writing has not been heard.

• Speed Cafe reports that Supercars owners are set to discuss the Rogers shareholding at the time of this writing while Neil Crompton concludes his role as interim Supercars Commission Chair.

• Mygale Cars has been one of the biggest feeder series single-seater manufacturers for more than 30 years and current chassis supplier of the French F4 championship. F1 Feeder Series spoke to founder and CEO of Mygale, Bertrand Decoster, about the exciting upcoming projects for his company, the loss of British F4, and competition with Tatuus. “(It’s) absurd that a 16-year-old must pay more than 500k for a season of racing.”

• The CSM Agency has a great article on some of the work they are doing with Saudia in Formula E. One campaign focuses on highlighting travel to the various cities that the series travels to while, the other features “movers and shakers who shed a light on the developments in the sport, geared specifically for the layman.”

• Formula E co-founder and chief championship officer Alberto Longo has said the all-electric series’ ability to replace exiting teams shows that the appetite for Formula E is growing. “That’s what we are feeling so proud of,” continued Longo. “In one year, two or three big names left, and two or three big names came the year after. It is very important that whenever someone leaves, there is an adequate replacement. I think the appetite for Formula E is growing on a yearly basis.”

Motorsport Sponsorship News

• In a brilliant piece of marketing, stock car racer Josh Bilicki has converted his Sargento sign crash into sponsorship with the company for his next race. The cheese producer is set to sponsor Bilicki’s #45 Alpha Prime Racing Chevrolet at Watkins Glen International on 20 August, a partnership that spawned from an accident with memetic value.

• Things may be looking bleak for F1’s Daniel Ricciardo these days but at least he has renewed his sponsorship deal with Australian telecommunications firm Optus. “Optus believes that great things can happen in times of adversity and from having the courage and commitment to say ‘yes’,” said Melissa Hopkins, Optus’ chief marketing officer.

• A.J. Foyt Racing will carry primary sponsorship from the Bommarito Automotive Group on the No. 14 Chevy driven by Kyle Kirkwood at next weekend’s IndyCar race at World Wide Technologies Raceway.

• Sponsorship Activation agency Sport Dimensions recently conducted an informative roundtable with SportsPro Media on the current status of motorsport sponsorship as well as what to expect in the future. “The cost of entry to modern sponsorships has dropped considerably as more flexibility is built into the system. Brands are no longer required to sign multi-year arrangements right from the start. The most successful programs still end up there but the new flexibility has allowed more brands to explore the opportunities sponsorship provides with less commitment.”

• Nielsen looks at sports sponsorship and brand awareness in sports sponsorships are raising more than just brand awareness. The universal breadth and appeal of sports continues to present brand sponsors with significant upside, both through exposure and how well consumers regard brands’ involvement. Combined, sports activations are doing more than boosting brand awareness—they’re leading to higher conversion rates. 

The Business of Running a Race Team

• Theeba Motorsport’s Reema Juffali reflects on the halfway mark of their first season of competition. “I never really considered forming my own team but I knew that if I wanted to elevate motorsport in Saudi Arabia, that this is what I would have to do,” continues Reema. “My ambition is bring Saudi people along for the journey and Theeba Motorsport will provide a platform for them to learn, grow and eventually be a part of an established, race-winning team. My ultimate goal is to one day make history by racing under a Saudi Arabian licence at Le Mans, but I also view Theeba Motorsport as a bridge – a bridge connecting Saudi Arabia to the rest of the world. It all started from wanting to have an answer when I was asked the question ‘how do I go racing?’ and hopefully soon,we will have Saudi racing enthusiasts who are actively part of the motorsport world.”

• As Beth Paretta of Paretta Autosport announced an additional IndyCar race at Laguna Seca for her team, she sat down with Women in Motorsports to participate in their 5 Questions With series. “My business was that one of the solutions is broadening the pool to include gender because you are leaving half of the candidates out. Because it was just 2014, it was a novel idea. Now everyone’s talking about it. I hope I was one of the people that helped to push that idea forward.”

• Jim Glickenhaus is planning to add customer Hypercars to the WEC field in 2023. “We are before several teams that are seriously considering buying one of our Hypercars,” said Glickenhaus. “We are offering our Hypercar for a lower price than anyone else.” That price is $2.5 million, plus another half a million for spares. “You can race alongside of us on a totally equal basis and have an equal chance to win Le Mans,” he said. “We don’t care if it’s the car that you own or the car we own. We just care if it’s a Glickenhaus.”

• In Life as a small F4 team: Formula Scout’s Danish adventure, Formula Scout looks at what it is like for a small team competing in an F4 championship. “The Danish F4 championship is a bit of an oddity on the modern European single-seater map, but its affordability means teams can still be run out of small trailers. So Formula Scout joined one for a weekend…“

• Mercedes has announced an increase in employees from under-represented backgrounds, following the launch of its Accelerate 25 program. In its latest report, Mercedes says that 18 months into the programme, female team members have risen from 12 per cent to 15 per cent of its total workforce. In addition, it has seen a rise in employees from minority ethnic backgrounds, which has grown from three per cent to seven per cent. In addition, it has seen a rise in employees from minority ethnic backgrounds, which has grown from three per cent to seven per cent.

• Formula Scout reports that Formula 4 United Arab Emirates’ second new team has been announced, as sportscar squad R2RACE will join the grid in 2023. “The team based in Dubai managed by Alessandro Tonoli and Marco Celentano born in 2019, quickly established itself locally by first winning the Clio Cup class in Procar, and since last year participating in the Gulf Radical Cup with excellent results. The driver line-up will be announced over the next few weeks.”