Tuesday April 24th, 2001
By Merissa Marr
SLEC, the company controlled by German television groups Kirch and EM.TV, tightened its grip on the commercial rights to Formula One motor racing on Tuesday but pledged to keep the sport on free television.
Kirch said its part-owned SLEC holding company paid $309 million for a 100-year extension to the commercial rights in an agreement with the International Automobile Federation (FIA), motor racing's governing body.
Munich-based Kirch also held out an olive branch to Formula One carmakers, who have been threatening to launch a breakaway circuit, with a commitment to broadcast on free-to-air television rather than migrate the sport to pay TV channels.
Without the long-term support of the carmakers, any rights deal holds limited value. However, the television commitment may not be enough to placate the carmakers, who are thought to want a stake in Formula One holding company SLEC.
SLEC is 75 percent owned by Kirch and its German media partner EM.TV, with Formula One boss and business supremo Bernie Ecclestone having cut his stake to 25 percent. Ecclestone agreed an outline deal to extend SLEC's rights last year but the agreement was thrown into question after the change of shareholding at SLEC.
Losing the long-term rights would have been a huge blow for Kirch and EM.TV who paid 70-year-old Ecclestone millions of dollars for a 75 percent slice of SLEC. The holding previously only held the commercial rights to Formula One until 2010.
The change of ownership had promoted fears that Kirch would restrict the sport to pay television rather than the more widely watched free television, reducing its appeal to the sponsors who help to bankroll it.
"SLEC and Kirch Group have confirmed that the championship will continue to be shown on free-to-air television," the FIA said in a statement after an extraordinary meeting in Paris.
Carmakers Still Pose Threat
SLEC is far from home and dry on the carmakers front. The FIA said the 100-year rights agreement would not affect the carmakers' Concorde Agreement which expires in 2007. Recent speculation has suggested the carmakers could consider setting up a rival championship once the Concorde Agreement binding it to the existing Formula One circuit expires.
Carmakers have said they want more say in the way the sport is run and more financial return from their investments. Industry sources say Kirch has already offered the carmakers a 25 percent stake in SLEC to keep them happy.
The fortnightly Grand Prix series attracts an estimated television audience of upwards of 500 million during the nine-month season. The FIA noted the latest deal was a further step in appeasing previous concerns raised by the European Commission.
The EC took Formula One to task in 1999, criticising the close links between Ecclestone and the FIA. However it ended a lengthy investigation after Ecclestone pledged to reduce his role in FIA affairs.
"As the FIA said, this (rights deal) is a step forward for the separation of sport and commercial (activities)," European Commission spokeswoman Amelia Torres said.