Lewis Hamilton – Mercedes-Benz driver

On Track With ‘Crenno’

Can Any Racing Car Driver Justify A Fee Of US$31 million A Year?

John Crennan
CEO – Nissan Motorsport

 

Behind blockbuster movies there are always talented producers and directors, behind premiership football clubs are skilled sports administrators and coaches, and behind successful racing teams are brilliant engineers and technical staff.

Nevertheless, it’s the ‘stars’ that generate the accolades and who will always be the centre of attention. The celebrities, footballers and the racing car drivers are the personalities that get the credit for great performances and results – and they often deserve it!

The fans are not interested in behind the scenes power brokers, even though these people are normally the architects of the success. Rather they want to know all about the stars who execute the plan on the silver screen, the football arena or the race track.

I’ve recently read an article in Forbes Magazine noting the world’s top 100 highest paid athletes in 2013. The three highest paid racing car drivers were:

1. Mercedes-Benz driver Lewis Hamilton (#19) – US$31 million

2. Ferrari driver Fernando Alsono
(#21) – US$29 million

3. US Nascar driver Dale Earnhart  Jr
(#28) – US$18 million

In the case of Hamilton and Alonso, 90 per cent of their income was earned through their team/employers as a driving fee, while the other 10 per cent came from endorsements. The ratio of fee-to-endorsements for Earnhart is 60-40.

I just don’t get (or like) this.

In a race team, I cannot reconcile how one person can receive such a massive amount more than other team members, when the driver’s performance hinges so much on the machinery they are provided from an array of technical geniuses.

This relationship is different to all other athletes listed in the Forbes Top 100, where other than motor sport, the list included football, soccer, boxing, basketball, baseball, golf, tennis and track – just nine sports where the big money was made.

Motor sport involves man and machine. Of all the other superstars mentioned, nowhere could I find an example where the athlete’s performance relied so much on technology and equipment.

My rule of thumb in managing race teams was to allocate no more than 12.5 per cent of the team’s budget to driver fees. However, I always felt the team had a responsibility to work hard to maximise income opportunities for drivers, with personal services contracts as a top-up income for the driver’s time outside of the team’s requirements.

My target was to grow the team driver fee by an additional 25 per cent and in doing so, control the driver’s external activities and align them to the best interests of the team.

This was prior to the advent of managers stepping in and promising drivers the world – with most of them delivering little more than an atlas.

My tolerance levels of driver managers were very low, as I often found their financial objectives (including their 20-25 per cent commission) at odds with the objectives of the team. I still hold that view, with a few exceptions of driver managers who finally ‘got it’ and recognised the number one priority for the driver is their responsibility to the team and their boss, not manager.

In 1998, 1999 and 2000, when the HRT team was running at peak performance, we had the two premium drivers in Craig Lowndes and Mark Skaife. Our payments never went beyond my 12.5 per cent formula for our driver’s fee, regardless of their superstar status.

Then, and still now, the containment of driver fees is crucial to the survival of teams in Australian motor sport. I keep scratching my head, asking myself the question, in the case of a few teams, how they appear to pay so much outside of the guidelines I used. I think maybe it’s a case of the tail wagging the dog in some team and driver manager relationships.

Let’s compare the overseas drivers in the top income bracket with those in Australia. In V8 Supercars, my guesstimates of the three highest paid drivers (with fees and endorsements combined) would be Craig Lowndes in the region of AUD$1.6 million per annum, Jamie Whincup and Will Davison in the $1 million to $1.2 million range.

In the next tier, my guess is Mark Winterbottom, Garth Tander and James Courtney maybe generating incomes between $700 and $900K.

Driver fees and whether or not they deserve big pay cheques is one thing – attitude and how they work with the team and fans is another. During the course of my 30 year involvement with motor sport, I experienced the personalities and characters of over 50 drivers. I suspect racing car drivers are no different to film stars and all other outstanding athletes who attract a lot of media attention.

In my experience, they tend to come in four varieties;
A) Role Models
B)  High Maintenance Prima Donnas
C) Easy Going Fun Loving Scallywags
D) Difficult Hot Head Sooks

In any elite level of motor sport, both here and overseas, I would guess that in the top 12 drivers in each category you would generally find an even spread of all four varieties. In each case, your dealings with them need to be diplomatically adjusted.

Whilst we can see a wide variation in the personalities of top drivers, with the fans being able to choose for themselves whether they like or loathe their perceived personality, there are three common traits in all racing car drivers that I respect and admire greatly.

The first and most obvious is their skill in driving and controlling a race car – it never fails to amaze me. No one can truly appreciate their capabilities unless they could sit alongside a driver as they perform their magic for 100 laps flat out, where performance is measured for everyone to see in tenths of a second.

The second is their level of competitiveness which surely measures amongst the highest in all sports, or any occupation for that matter.

Third is their courage. We tend to forget how dangerous motor sport is and how when a racing car driver straps themselves in, they are risking their life like no other athlete in any other sport. If the organisers of motor sport go to great lengths of warning on entry about how dangerous motor sport is for a spectator, you can probably multiply that danger 50 times for the driver.

Drivers’ courage fascinates me as never have I heard a driver reference the danger factor or display an ounce of hesitation in the quest for victory or a great race result.

One of the great enjoyments of a career in the automotive industry has been to get to know all the varying types of characters in car companies, dealerships, media, suppliers, fleets and motorsport.
When it comes to racing car drivers, they take my trophy for being mercurial and enigmatic. However these ‘interesting’ and somewhat ‘complex’ traits seem to always make for relationships that are full of turbulence, but also a lot of appeal.

Many drivers feel the pressure of job insecurity in this demanding and cut-throat sport. There is also an enormous amount of pressure on drivers in terms of their performance, which relates directly to career longevity, particularly as they approach their mid-30s.

By this point, they have usually passed their competitive peak and come to the realisation that they know little, other than racing, and therefore need to go as long as they can in the main game to maintain historic income levels.

Of the 30 main-game V8 drivers from season 2004, there are only seven still racing at top level. During the same period, there have been 50 drivers come and go as V8 Supercars mainstream drivers.

Some lasted just one season, as this tough sport can kill so many aspiring careers. Drivers over 35 are now finding more pressure from a younger generation of drivers. Ten years ago 30 per cent of drivers were under the age of 30 – this year it’s 36 per cent, and the figure seems set to climb.

Another factor possibly making drivers edgy is dealing with the uncertainty surrounding career opportunities after racing, be that at age 25, 30, 35 or 40. Most drivers have devoted their lives to racing from their early teens, putting Go-Karting well above a formal education. Many V8 Supercar drivers have felt their natural extension, after or during driving, was to invest in owning their own team, however success is rare and casualties high, due to lack of business training and understanding.

Todd and Rick Kelly are an exception to the rule and are very fortunate to have gifted business brains, quickly picking up the fundamentals of people and financial management. One mistake they did not make was to pay themselves or any of their contracted driver’s unsustainable fees.

So whilst we may raise our eyebrows at driver income levels and consider them extreme at the top end, there are a lot of other considerations that need to go into the mix, least of all short career spans.

So regarding my earlier remarks, perhaps I am just jealous because I could not find an employer to pay me $31 million a year in my 30s?

Or perhaps even more, I can’t help but cynically draw the comparison between Lewis Hamilton’s substantial pay cheque and the combined annual budget of 12 cars in the V8 Supercar Series.

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