The corporate mega deals reshaping MotoGP and other racing series

This may be true, but TNT Sports (which gets its name from Ted Turner, who founded Turner Network Television in the 1980s) has already been accused of building a UK broadcast monopoly in cycling, prompting formal complaints to the UK’s Competition and Markets Authority, claiming “abuse of monopoly” and “price gouging”.

TNT now has a similar hold over motorcycle racing in the UK.

There are laws against monopolies, because monopolies are bad for consumers. Once a company gains overall control of any area of business it can use its dominant market position to manipulate prices, because consumers effectively have nowhere else to spend their money.

This is why Liberty Media has yet to be given the OK to take over Dorna Sports, the current owners of MotoGP and WSBK, even though it’s been almost a year since the American media company offered £3.5 billion to buy 86% of the Spanish company, which has owned MotoGP for three decades.

Liberty already owns the Formula 1 car series, so if it does acquire MotoGP it will own the world’s two biggest motor sport championships, which risks Liberty taking advantage of its stranglehold by increasing fees for broadcasters, which are passed onto fans, for example.

Dorna’s former owners CVC Capital Partners was denied ownership of the two properties in 2006 for this exact reason. The Jersey-based private-equity business bought Dorna in 1998, then acquired a controlling stake in F1 a few years later. The European Commission ruled that this constituted a monopoly, so CVC sold Dorna to London-based private-equity group Bridgepoint, which is now selling to Liberty.

The European Commission is currently evaluating Liberty’s acquisition of Dorna.

“By acquiring Dorna Sports, Liberty Media would hold the commercial rights to two of the most popular motor sports in Europe: Formula 1 and MotoGP,” says the commission’s Teresa Ribera. “We need to more carefully assess whether this acquisition could negatively affect European broadcasters, for example in terms of increased license fees, and ultimately European consumers and motorsports fans through higher prices.”

Ribera will no doubt be watching what’s going on with Liberty’s music subsidiary Live Nation Entertainment-Ticketmaster in the US.

The US Department of Justice is currently suing Live Nation Entertainment-Ticketmaster for allegedly monopolising the live music industry. The DOJ claims that “Live Nation-Ticketmaster’s exclusionary conduct and dominance across the live concert ecosystem harms fans, innovation, artists, and venues”.

No wonder there’s concern that Liberty’s ownership of F1 and MotoGP could have a similar effect across the world of motor sport.

Live Nation-Ticketmaster is also being investigated by UK regulators, over concerns that it breached consumer protection laws during its recent sale of tickets for the Oasis reunion tour. Live Nation-Ticketmaster used so-called dynamic pricing during the sale, without warning customers, so some fans queuing online found that ticket prices had more than doubled by the time they’d reached the front of the queue, because the tickets were “in demand”.

The European Commission will also investigate the potential benefits of Liberty buying MotoGP.

“We will at the same time openly consider any substantiated claims by the parties about possible benefits this acquisition might bring, for fans, the industry and for consumers,” adds Ribera

Liberty believes it will get the green light from the commission.

“We are confident this transaction will benefit MotoGP’s business, fans, viewers and the broader motorcycle industry,” says a Liberty statement. “Market participants have widely recognised the benefits of the transaction.”

The Liberty deal is indeed very popular within the MotoGP paddock, because most stakeholders believe the company will make a better job of promoting and growing the championship, because it’s done just that in F1. For example, F1’s YouTube channel has gone from 300,000 to seven million subscribers, thanks to Liberty spreading the word.

“MotoGP provides the best show ever and we are not getting back according to what we are delivering,” says Aprilia Racing CEO Massimo Rivola, who joined MotoGP from Ferrari’s F1 project. “So I am very keen to see Liberty onboard, since normally the Americans are quite good at marketing, according to what they did in F1. It looks like they have a sort of magic touch, so we need that magic touch in MotoGP.”

The hope is that further boosting MotoGP’s fanbase will bring more money into the championship, which has always struggled to attract the sponsorship its already impressive global following would seem to deserve.

The European Commission should complete its investigation into the Liberty deal by the end of June.

Next Tuesday, 25 February, is D-Day for KTM, when the insolvent company’s creditors will decide its future. KTM’s numerous creditors, owed around £2 billion, will vote on the debt restructuring plan proposed by KTM management, which offers creditors 30% of what they’re owed.

If this plan is approved by creditors holding at least 50% of the total debt, KTM should be able to stay in self-administered insolvency and start the process of extricating itself from its financial woes.

However, the situation has been complicated by a rival restructuring plan from American hedge-fund business Whitebox, which is trying to muscle its way into gaining control of the Austrian company, Europe’s largest motorcycle manufacturer. Whitebox itself holds some KTM debt and has the backing of some other creditors.

Whitebox is tempting creditors to vote for its plan by proposing they receive at least 45% of what they’re owed. This plan could be good for creditors but it’s certainly bad for KTM’s current owners, who will lose control of the company if Whitebox succeeds.

Whitebox has a lot of experience in high-risk/high-reward distressed debt, a popular investment with so-called vulture funds. Investing in distressed debt can be highly lucrative because the debt can be bought at big discounts, then (if all goes well) later sold for a much higher value.

Who knows what Whitebox’s plans for KTM could be?

Last week Whitebox accused KTM management of trying to undermine its proposal and is currently rallying more creditors to vote for its scheme.

Some of those creditors may consider the Whitebox plan as a vote of no-confidence in KTM management, which even during the first months of last year, when the company was already in deep trouble, paid out millions in dividends to shareholders.

Even if either plan is approved, there’s no guarantee that KTM’s MotoGP project – with riders Pedro Acosta, Brad Binder, Maverick Viñales and Enea Bastianini – will survive, despite what KTM management and others within the championship have been saying in recent weeks.

Literally no one knows what will happen, except the restructuring agents, investors, banks and hedge funds involved. These include Indian brand Bajaj, which owns 49.9% of KTM.

When the decision does come it won’t be made by people with an emotional attachment to racing – like former KTM CEO Stefan Pierer – it will be made by financiers, whose eyes are only for the bottom line.

If they think MotoGP is important to KTM’s future, the project will continue. If they think MotoGP is an unnecessary outlay for a troubled business, it won’t continue. If the latter happens, there’s one last hope – that the restructuring agents can find someone to buy the project as a going concern.

Current MotoGP dominator Ducati went through a similar process with its sister company Cagiva when it ran into cashflow problems in 1994. Suppliers went unpaid and production lines were halted, just like KTM.

When the banks came to the rescue, they laid out a clear plan: Ducati could continue racing in World Superbikes, because the brand’s success in that arena was a clear route to expanding sales, but the Cagiva MotoGP project had to be shut down, because it gave no clear marketing benefit.

The KTM situation is fast moving and far from clear. The one certainty is that MotoGP losing almost a quarter of the grid would be a huge blow to the championship, with potential knock-on effects for the Liberty deal, and, even more importantly, a hammer blow to KTM staff and their families.