The first of a three-part series on how MotoGP needs to solve its current crisis, we explore just how MotoGP got into the financial pickle it finds itself in.
Motorsports worldwide have taken a pounding over the past few weeks: first, there was the announcement that Honda were pulling out of Formula 1 with immediate effect; then came statements from Subaru and Suzuki announcing that both manufacturers were pulling out of the World Rally Championship; in the US, American Honda announced that they would not be fielding a factory team in the AMA Superbike championship; and finally, over the holiday period came the bombshell of Kawasaki's withdrawal from MotoGP.
So how did we get here, and more importantly, what can we do about it? Over the next three days, we'll be examining the state of MotoGP, and asking why it turned out to be so hideously expensive. We'll also be studying the likely effects of the most common suggestions being made around the world, and asking how effective these proposals will be. And finally, we'll be making some proposals of our own, which we feel neatly sidestep the pitfalls which have brought MotoGP to its current, parlous state.
Firstly the question of how MotoGP, and motorsports got into this state in the first place. The main, and most obvious culprit is the global financial crisis, which has hit the car and motorcycle sector particularly hard in the second half of 2008. With sales plummeting and the banks only willing to lend money to them at exorbitant interest, the manufacturers are being forced to examine their activities with an almost pathological attention to detail for areas where they can cut costs.
Naturally, one of the first places the manufacturers are looking is at their racing programs: After all, though racing is an undeniably powerful marketing tool, its benefits are for the most part intangible and hard to quantify. The most commonly hailed benefit of racing is its role as a rolling laboratory; a place to develop new technology to improve the breed, as the expression has it. But appeals to accountants to regard racing as a platform for Research and Development are likely to fall on deaf ears, as R&D budgets are the first area where the bean counters look for savings, and among the first casualties in a recession.
As racing fans all over the globe see the sport they love come under threat, the demand is growing for Something To Be Done. The Something which is to be done is occasionally set out in a clear list of suggested actions, such as Fausto Gresini's proposals to reduce the cost of racing, which included a ban on carbon fiber brakes, running three bikes to a two man team, a rev limit of 17,000 rpm and engines having to last for five grand prix weekends. At other times, it involves more vague ideas, such as FIM President Vito Ippolito's calls for electronics to be limited in order to cut costs, though Ippolito is silent on just what should be banned and how that would save money. But usually, it remains little more than a call for action, any action, as a demonstration that this problem is being taken seriously.
Just Ask Bernie
Along with these calls for action, there is usually a reference to Formula 1, pointing to the world's premier four-wheeled formula as an example of a series taking action to cut costs. Over the past couple of years, the FIA, the governing body of car racing, has introduced a package of measures ostensibly aimed at leveling the playing field and cutting costs, including introducing a spec ECU, banning traction and launch control, and requiring that engines last for two race weekends, with penalties for failing to do so. Not content to leave it there, the FIA has a host of new regulations ready aimed at reducing costs even further, including limits on wind tunnel testing, a ban on further engine development, and even proposing a single, standardized engine.
The problem with all of the cost-cutting measures put in place by the FIA is that so far, they have had little discernible impact on budgets in Formula 1. The teams are still spending something approaching half a billion dollars for a full season of racing, and there is little relief in sight. Clearly, the FIA's plans have not worked out the way they intended.
The reasons for this are surprisingly simple, and familiar to anyone who has tried to put together an employee incentive program, or draw up legislation, or run a large project, or generally tried to impose a set of black-and-white rules on a world composed almost entirely of shades of gray. And they also serve as a clear lesson and warning to those now calling for drastic action in MotoGP.
The problem with the rules drawn up by the FIA, as well as the rules proposed by various authorities for MotoGP and other series, is that they don't take a few fundamental principles of economics and politics into account. The most important of these are the law of unintended consequences, the law of diminishing returns, and the tendency for rules to encourage a practice known as "gaming the system".
It's The 800s, Stupid
The law of unintended consequences will be familiar to all MotoGP fans, whether they are aware of it or not. After Dajiro Kato's tragic accident at Suzuka in 2003, the Grand Prix Commission decided to reduce the capacity of the MotoGP bikes from 990cc to 800cc. The intention was to make the bikes slower - and therefore safer - in the hope of preventing a similar accident from happening again.
It didn't work, of course. As soon as the 800cc Ducati GP7 made its first appearance at Brno, it was setting lap times just a second slower than the 990s, with still seven months of development left before the 800s were raced in earnest. Lap records were being broken in that first season of the reduced capacity bikes, and what's worse, the 800s were arguably less safe than the 990s. The lower top speeds meant that braking happened later, making for higher corner entry speeds, while the lost mid-range power meant that it was harder to compensate for mistakes using the great lumps of torque the 990s had, and so maintaining corner speed became crucial. And as bikes were going faster round corners - the place where most crashes happen - they were moving faster when they crashed, dumping riders in the gravel at higher speeds.
But the most insidious effect of the switch to the 800cc formula - and the clearest example of the law of unintended consequences turning round and biting Dorna in the posterior - was the fact that the reduction in capacity raised the costs of racing enormously. Apart from the obvious costs of having to design new bikes from scratch (though only Honda built something completely new), the smaller capacity did the worst thing possible in racing: It made horsepower expensive.
Let me explain a little what I mean by this. When the new formula was announced, the Japanese manufacturers were convinced that the slower bikes would shift the emphasis in MotoGP, reducing the importance of top speed and making maneuverability and the ability to flick the bikes from side to side absolutely key. Of course, this idea lasted right up until the bikes crossed the line to end the first lap of the first race of 2007 at Qatar, as Casey Stoner simply blew past the rest of the field on the Ducati Desmosedici GP7. By reducing the horsepower of the bikes from 250+ horsepower to 200+ horsepower, 10 extra horsepower suddenly became a lot more significant, and the premium those horsepower commanded rose exponentially.
But with less capacity - and less fuel - getting more horsepower from the engine meant that the already highly-strung machines had to be tuned even further, making the bikes less reliable and more fragile. Honda quickly learned just how expensive this could be, reducing the engine life from around 600 kilometers between rebuilds to about 300, though Honda would never confirm those figures. And an engine rebuild meant flying the engine back to HRC, where a team of engineers would spend three days stripping it down and reassembling it, before flying the engine back to the teams at the next race.
The other unintended consequence of the more highly tuned engines was the need for more sophisticated and complex electronics to allow for smooth engine delivery. The pursuit of horsepower had left the engines all but unrideable without some way of easing the power delivery. Traction control and fuel management became ever more important to going quickly without running the risk of being launched into outer space by an ill-tempered 800, a situation exacerbated by the reduction in fuel capacity from 22 to 21 liters.
In a further twist of fate, the fact that the electronics made the peaky engines more manageable further drove the chase for horsepower, increasing the importance of electronics again in a vicious circle. Previously, when ECUs were much more rudimentary things, the only way to tame a peaky engine was by sacrificing a little bit of top end in return for a bit of mid-range and a more ridable motorcycle. But now, traction control takes the sharp edges off the power delivery, ensuring that no matter how spiky the torque curve, the rear wheel never spins unexpectedly. Freed of the requirement to provide a smooth power delivery, the engineers can chase horsepower, and in achieving that goal, make the electronics even more indispensable yet.
Adding to the costs is the fact that the hunt for increased performance always runs into another iron law of economics: the law of diminishing returns. Every time the engineers make the bike go faster, it makes it more difficult, and more expensive, to find further improvements. A little like dieting, the first few pounds are easy, but the more weight you lose, the harder it gets to find extra pounds to shed.
The laws of physics lend a helping hand here too: the power needed to overcome air resistance increases as the cube of the velocity. In other words, if you want to go twice as fast (with no changes to the aerodynamics), you need to produce EIGHT times the horsepower. Obviously, even the bright sparks at Ducati or Honda are unlikely to be able to double the speed of their bikes, but the same holds for small increases: A 1% increase in speed requires an increase in horsepower of approximately 4%.
The difference between a fast bike and bike capable of winning championships is only small, perhaps only a few tenths of a second a lap. But the amount of money it costs to get those extra tenths is astronomical. The LE (satellite spec) Gilera which Marco Simoncelli started the 2008 season in 250s cost around 300,000 euros. The RSA (factory spec) version of the same bike he finished the season on cost 1,250,000 euros for the season. Simoncelli was doing pretty well on the LE spec bike, but the extra two tenths or so of a second that he found on the factory spec bike was the difference between being a contender and being World Champion. The problem is that to be able to get those two tenths, he had to spend four times the money.
The situation is exponentially larger in MotoGP. And every time the engineers find another horsepower, it makes the next horsepower gain that much harder to find, and that much more expensive. But with the smaller capacity putting horsepower at a premium, the laws of unintended consequences and diminishing returns combine to create a giant pit which swallows dollars, a million at a time.
A Rod For Their Own Backs
If the above made you feel sorry for the manufacturers, spare your tears. The MSMA - the body representing the manufacturers on the Grand Prix Commission - helped draw up the regulations, and understood the possible consequences of the rule changes, first to the four strokes, and then by reducing the capacity. And although it would be going too far to claim that the manufacturers were aiming at increasing costs, they were fully aware of the fact that any increase in costs would play into their hands. After all, the more expensive the series, the less likely that smaller manufacturers would enter it, thereby limiting the competition and preventing them from being caught out by a bright spark with a big idea.
This purposeful increase of the costs of racing is a consequence of our third concept, the idea of gaming the system. Because the manufacturers were involved in drawing up the rules, they ensured that the rules would play out in their favor, and give them the best chance of winning. But this, too, creates a vicious circle, for as the costs of MotoGP increase, the stakes rise, and the cost of losing increases as well. When taking part is already seriously expensive, manufacturers can no longer afford just to take part, they have to win to justify the massive investment they are making in the series.
So the bike makers start gaming the system again, spending yet more money, in an attempt to outflank their rivals, and make it too expensive for them to be competitive. The more expensive racing becomes, the less likely they are to face serious competition.
For anyone who thinks this is a rather far-fetched idea, it is worth pointing out that, whether deliberate or not, this strategy has already paid dividends. The first casualty was the brave WCM project, the last of the true home brew machines. With limited resources, the team put together an entire machine to compete in MotoGP based very loosely on a 1000cc Yamaha R1 engine. But the Grand Prix Commission ruled it was ineligible to compete, as it violated the rules stating that the bikes must be prototypes.
Then there was Team KR's Proton V5 project, which never made the power required to be competitive. The Proton lump was replaced by a V4 power plant from KTM, but the Austrian manufacturer also pulled out of racing very quickly, intimidated by the sheer amount of money required to develop the engines. Back at WCM, the Blata V6 never even appeared, as the Czech minibike maker saw its profits wiped out by sales of Chinese replicas of their machines.
The final chapter came with the ill-fated Ilmor project, the last serious project from outside of the Big Five to attempt an assault on MotoGP. But that only lasted two races, after Mario Illien couldn't find a sponsor prepared to bear the astronomical costs of MotoGP while the X3 was still in development and at the back of the field. Only Team KR remained, with a Honda engine in their own chassis, and even that project failed after bitter disputes at the end of the season between Honda and Team KR over the level of support provided to the team.
And so, ruthlessly and efficiently, the manufacturers have eliminated the competition in MotoGP by making it prohibitively expensive to enter. They have used the rules, and their deep pockets, to improve their own chances of winning, and at the same time, discouraged new entries into the class. While the world economy was booming and the manufacturers had money to spare, this was a highly successful strategy. Now now that sales of motorcycles are slumping, its weaknesses are terrifyingly obvious.
Given the deeply discouraging summary of the problems facing MotoGP in its current incarnation laid about above, is there anything that can be done about rising costs in MotoGP? The answer, I believe, is yes, but it will take some brave and counterintuitive decisions to get there. Tomorrow, we will examine some of the many proposals which have been made over the past few weeks, and explain why they are more likely to make things worse rather than better.
Posted: 14/01/2009 at 14:12
Posted: 14/01/2009 at 15:41
Surely, by definition, any prototype racing is going to be expensive. Consequently the first casualty in a financial crisis.
Racing improves the breed is dubious, All this fly by wire stuff and bollocks, is that helping the average joe? A decent antilock break system would help street bikes far more than another monster displacement bike with race cams and an electronic engine management system to tame it to into a rideable bike.
imo, motogp is no longer the preimere (sp?) class for motorcycle racing.
Posted: 15/01/2009 at 00:26
Why does racing have to "help the average Joe"? Is product R&D the sole purpose of motorcycle racing?
And if MotoGP is not the premier class for motorcycle racing, which is?
Posted: 15/01/2009 at 11:16
Phew, that was a long read.
How about this slant from an economics / business perspective.
Too many people see MotoGP as a resreational pastime, where they are there to be entertained. When racing first started, people did it for the buzz & excitement, quickly followed by spectators turning up. At this point it became a business.
Like all businesses, they have to evolve or die. The speed of the technologocal revoltion has pushed 100 years of development into just 5 years, so the costs are spiralling, as all technology needs to be cutting edge, to gain a comptetive angle.
As thechnology has come to the fore and costs risen substantially, so the spectacle has become inversely enjoyable.
Effectively, this busines has failed to manage its consumer market effectively and so with costs spiralling, sponsorship dropping (exacerbated by the tobacco advertsing ban) and TV right income dropping, this business is failing.
Unless you have money to burn, no businessman will run a loss leader at this level for long, so will cut thier losses and run.
MotoGP does not have a right to exist, just as typewriter / telex / fax manufacturing companies didn't at the dawn of the computer age.
Evolve & grow or stand still & fail. Sadly MotoGP is taking the latter route
Posted: 15/01/2009 at 11:25
Posted: 15/01/2009 at 12:48
"Why does racing have to "help the average Joe"? Is product R&D the sole purpose of motorcycle racing?"
Dunno, what is it then? Its not particulary interesting racing is it? (Actually, 250 class is pretty exiting. )
"And if MotoGP is not the premier class for motorcycle racing, which is? "
SBK, its most relevant, lots of people can win and it encourages Manufacturers to develop their road going bikes. Also, the riders are all top blokes and the season review DVD's dont force you to watch advertising for 2 minutes before allowing you to the title menu.
Posted: 15/01/2009 at 18:17
Tltourer wrote (see)
"Why does racing have to "help the average Joe"? Is product R&D the sole purpose of motorcycle racing?"Dunno, what is it then? Its not particulary interesting racing is it? (Actually, 250 class is pretty exiting. )"And if MotoGP is not the premier class for motorcycle racing, which is? " SBK, its most relevant, lots of people can win and it encourages Manufacturers to develop their road going bikes. Also, the riders are all top blokes and the season review DVD's dont force you to watch advertising for 2 minutes before allowing you to the title menu.
I've always believed that the point of motorcycle racing is to prove that you can go faster than the other guy. Nothing more, nothing less. All the rest is just window dressing.
As for the premier class, to me, the premier class is where the best riders are. At this moment, that's MotoGP. I would say that of the 10 best motorcycle racers in the world, at least 7 are in MotoGP.
Of course, just because that's the way it is at the moment, doesn't mean that things will stay that way forever ...
Posted: 15/01/2009 at 19:36
Hang on a sec, you said "As for the premier class, to me, the premier class is where the best riders are"
Isnt Moto gp a show case for traction control, launch control, adaptive suspension and general fly by wire gubbins?
I seem to recall Rossi saying that the only place the rider could make the difference these days was on the brakes.
Posted: 15/01/2009 at 19:43
Posted: 15/01/2009 at 19:59
Posted: 15/01/2009 at 20:02
R1 loon wrote (see)
Oi David, what's wrong with my comments?
Posted: 15/01/2009 at 20:06
Nothing at all! Some valid points there.
You rightly point out that MotoGP is a business, however, I disagree that they have failed to take care of its consumer market. TV figures around the world continue to grow (though more slowly, since the introduction of the 800s made racing more processional), and it is still a very popular sport - audience figures are higher for MotoGP than for football in Italy, and in Spain, MotoGP is a close second to football as the nation's favorite sport.
But there are two sides to any business: Expenditure and income. MotoGP is expensive, but not that expensive. Kawasaki probably spent about 30 million pounds a year on MotoGP, compared to the 200+ million Honda spent in F1. The real problem is income in MotoGP.
Where MotoGP has failed is in attracting sponsors. ING pour 100 million euros a year into F1, yet most MotoGP teams find it hard to raise the 10-15% of that figure it would take to run a 2 rider satellite team, despite the fact that F1 is only marginally more popular worldwide than MotoGP. Ducati, Honda and Yamaha manage to attract decent sponsorship. Why can't the rest?
Posted: 15/01/2009 at 20:39
TV figures are not an exact science and are swayed as you rightly say by two countries obsession wth the sport; Italy, the Rossi factor (watch that fall away in a few years time) and Spain, traditional bike racing mania here. The rest see it as a minority pastime and viewing.
Agree that income is a problem, hence my comment on tobacco advertising ban.
You could read the Italy / Spain comments as the reason for the struggle to attract advertising income. The three manufacturer teams that you've mentioned are all the winning teams.
The same income issue is facing a lot of sports, snooker is in crisis, football clubs are struggling at the lower end, but the top end successful clubs can still command silly figures for sponsorship.
The Credit Crunch will hit even harder as sponsorship contracts end and are not renewed.
As for the looking after their consumers, the processional racing of the last 2 years is putting a lot off, as will the loss of Eurosport coverage. These are likely to be "lag" problems though, where the true impact is not felt for a few years and a recovery will take the same amount of time at best.
Posted: 15/01/2009 at 20:48
Perhaps it's time for advertisers to look at sponsoring the" REAL WORLD" racers.I for one would love to see more coverage road racing.Just my two pennethand slightly off topic.A comment never the less.
Posted: 15/01/2009 at 20:55
I wasnt saying the rider isnt important, I'm taking issue that the best riders in the world are in Moto gp.
I reckon the local round of NZ super bike is as entertaining as Moto gp. Andrew Stroud against the Aussie interlopers.
I agree with that guy in the article in bike magazine, they should stop pissing round with the rules and let it stablize, its the changes that are expensive and produce the teams that win everytime. Once everyone has caught up the smaller teams are in with a chance.
Posted: 15/01/2009 at 21:32
Posted: 16/01/2009 at 11:02
I still say the best way to make the sport cheaper and more accessible to privateers is to throw away the rule book altogether.
Simplify the rules - Two wheels, maximum capacity, minimum weight, maximum fuel load.
As you rightly say, David, raising the minimum weight will negate the need for the more exotic materials, and allowing an anything-goes attitude towards engine type/configuration, aerodynamics, chassis design will encourage innovation rather than evolution, and that's where the bright young engineers step in.
Of course, it's not as simplistic as that, but you get my drift. Got to be a lot better than a glorified supersport class though...
Posted: 17/01/2009 at 22:36
I'm confused by the 3rd article, one bit that made sense was to stop playing around the rules.
Bring back 990 and limit inboard computer memory to stop to much electronic gubbins IMO
Who cares if the bikes are fast, arent race bikes supposed to be fast? If the riders dont like the risk, then go and get a boring deskjob working for pittance like the rest of us!
Most of us riding in the weekend have a higher crash and fatality rate than motorcycle racers.
Posted: 19/01/2009 at 00:02
Become a fan of Visordown
Follow us on twitter
Other Immediate Media Sites
Our eCommerce Platform
© Immediate Media Company Ltd 2012. This website is owned and published by Immediate Media Company Limited. www.immediatemedia.co.uk