Does F1 have a Red Bull problem?
Plus, CVC nets a slimmed-down tennis deal, Adidas suffers Yeezy fallout
Qatar’s designs on the Champions League will need another rethink. On Wednesday, Paris Saint-Germain were dumped out of European football’s elite competition at the hands of German juggernaut Bayern Munich.
PSG, which has been owned by a Qatari investment fund since 2011, had assembled the most expensive playing squad in football history for its campaign this year. The club’s wage bill surged to €728mn last season, according to Football Benchmark, thanks to the star-packed front line of Lionel Messi, Kylian Mbappe and Neymar. Yet big money in football only gets you so far.
Messi’s contract runs out this summer, while Mbappe has been linked with a move to Real Madrid. Next year a Qatari-owned PSG may have to compete with a Qatari-owned Manchester United. It looks like a chapter could be drawing to a close in Paris, with uncertainty over what comes next.
This week we’re taking a look back at F1’s first race of the season, which has raised a red flag over the sport’s competitiveness. Plus, CVC finally wrapped up its deal for tennis — but it’s much smaller than originally planned. Do read on
Max Verstappen was so dominant in the first grand prix of the Formula 1 season that one rival openly warned that his Red Bull team could win every race this year.
The Dutch driver is the clear early favourite to win his third driver’s title in a row, cementing his position as the man to beat in a sport long-dominated by seven-time champion Lewis Hamilton and the British icon’s Mercedes team.
Their rivalry has failed to reignite since a refereeing decision cost Hamilton an eighth world championship in Abu Dhabi in 2021. That’s largely down to Red Bull’s superior response to a big change last year: the sport’s introduction of a new car.
Sweeping changes are tough for F1 teams. They go away and work on their cars, but only learn how well they’ve done by measuring their relative performance against rivals in tests, practice runs and qualification. Mistakes are costly and hard to rectify. You can watch our recent video from McLaren HQ on what it takes to produce an F1 car.
Everybody was in awe of Red Bull’s pace in Bahrain. Mercedes driver George Russell said the championship is already “sewn up”.
That’s not what F1 had hoped for when devising new rules with its governing body, the FIA, to level the competitive balance in the sport.
Tight races are vital for any sport looking to build its audience. F1’s global boom coincided with Red Bull’s dash to break Mercedes’ eight-year grip on the constructors’ championship.
But following the introduction of the new cars last year, Mercedes slumped to third in the constructor standings, well behind Red Bull and Ferrari.
This year things look even more bleak for the team led by Austrian entrepreneur Toto Wolff, with Aston Martin’s Fernando Alonso making the podium in Bahrain. The result will have been particularly galling — Mercedes provides engines and other key components to Aston Martin.
Of course, one race doesn’t make a season. Aston Martin is allowed more time in the wind tunnel this season because of finishing lower down the grid last year, another way F1 is fostering competition.
Historically, Mercedes, Red Bull and Ferrari would outspend their rivals to stay ahead of the pack. But the introduction of a spending cap last year — another major top-down reform — means Mercedes can’t just spend its way back to the top.
The spending limit — set at around $137mn this year — was designed to foster competition and improve team finances. Over time, the cap should have its desired effect.
But in the short-term, preventing teams from throwing money at a problem looks set to rob F1 of its usual thrills.
This week, the Women’s Tennis Association announced a deal with buyout firm CVC Capital Partners in which the Luxembourg-based firm will form a new joint commercial venture with the tour, in an effort to boost the profile and prize money for the women’s game.
After years of looking for a way into the sport, CVC has agreed to pay a reported $150mn for a 20 per cent stake in the new business.
To recap: in 2021, the firm came close to a $600mn investment in a proposed joint entity between the WTA and the Association of Tennis Professionals — the men’s pro tour — to unite and grow their marketing, media and data rights. But the two sides never came to terms with CVC, in part because of a gulf in valuations between the men’s and women’s games.
Another big issue is the prize money for women’s tennis, which according to a data analysis by the FT’s John Burn-Murdoch, last year was 75 per cent lower than that paid to men across all tournaments besides the four Grand Slams. The Australian, French and US Opens as well as Wimbledon have together awarded equal purses to its male and female competitors only since 2007.
Addressing inequalities in the financing of men’s and women’s sport isn’t unique to tennis — there are yawning gaps in prize money for the Fifa World Cups and in salaries of NBA and WNBA players, to name just two. But tennis, with its roughly 11-month tour calendar and separate administrations for both games, has proven a particularly fraught challenge.
Some are sceptical of the role that private equity can play in creating long-lasting change. In recent years, the likes of CVC, Silver Lake, Elliott and others have tied up investments in football, rugby and cricket, while new sports-focused funds like Arctos and Red Bird have sprung up. But it remains an open question as to whether the traditional PE playbook of sprucing up a business and cashing out after five-to-ten years will work across the sporting world.
Any attempt at a swift exit by CVC would potentially leave WTA on the hook for finding a replacement stakeholder, or imperil the already-unequal finances.
For now, the WTA is optimistic, pointing to CVC’s 25 years of history in investing in sports properties, including as the former owner of F1. The firm held the motorsport tour for 11 years, selling it to Liberty Media in 2017 for a 450 per cent return on investment.
CVC has another important reason to make its WTA foray a roaring success: the potential to revive its original plans for a unified global tennis tour. The slimmed down deal will serve as a showcase for what private equity firms can achieve.