Why Price Caps Are The Best Way of Cutting Costs in MotoGP and WSBK

With the announcement of the introduction of price caps for brakes and suspension in MotoGP from 2015, the Grand Prix Commission, MotoGP's rule-making body, appears to have finally found an effective way of controlling costs in the series. Instead of trying to control costs indirectly and seeing their efforts kicked into touch by the law of unintended consequences, the rule-makers have decided to attempt to go straight to the heart of the problem.

Will capping prices unleash a whole set of unintended consequences of its own? Will, as some fear, the move to cap prices lead to a drop in quality and therefore a reduction in R&D in the areas which are price-capped? And will the price cap act as a barrier to new entrants, or stimulate them? These are hard questions with no easy answers, yet there are reasons to believe that price caps are the most effective way of controlling costs, while the risks normally associated with a price cap, such as a reduction in quality, are lower in a racing paddock than they are in other environments.

Classical economic theory proposes that under normal conditions, high-value markets such as the one for brakes and suspension in MotoGP encourage both innovation and new entrants into the market. High prices offer relatively high margins of return, and should make it a highly competitive market. This, in turn, should also stimulate research and development, as companies look for technological advantages over their competitors which they can use to increase sales. The race track would appear to offer a perfect benchmark, pitting one brand of equipment against another, and the stopwatch and results sheet providing an objective comparison between products.

Unfortunately, however, racing paddocks are a long way from being perfect markets. There are many, many distortions which mean that any attempt to manage costs via traditional economic methods will fail. The usual law of supply and demand requires the existence of two parties making rational decisions on whether to do business together. If the prices of a seller are too high, then a buyer will go elsewhere, looking for a similar alternative available at a lower price.

The problem for motorcycle racing is that Homo Economicus is not to be found in the paddock. As strange as it may seem, motorcycle racing paddocks are some of the most conservative engineering environments imaginable. "If it wasn't used on a 1962 Matchless, it can't be any good," one frustrated engineer quipped to me once, describing the fear of revolutionary change which exists within the paddock. Teams choose to stick with technologies they know and understand, only accepting change once proven elsewhere, and only accepting change in small, evolutionary steps, rather than as a huge revolutionary leap.

This conservatism is not restricted to mechanics and engineers. It is very much shared by riders as well. Earlier this year, Tech 3 crew chief Guy Coulon explained the way that riders view equipment: "Nearly every time, riders prefer to use the same things as others," he said, "so that is why we have less and less [Moto2 chassis] manufacturers. And everybody wants the same brakes, and the same suspension, because if you have a different suspension and you are behind others, it is because of the suspension, even if your suspension is working very well."

The hubris which every rider requires to sustain the effort needed at the very top level of motorcycle racing leads them to believe that if only they were on exactly the same equipment as every other rider on the grid, they would be winning, or on the podium at least, at every race. The riders believe - rightly - that the rider is a huge part of the competitive equation. Riders therefore want to eliminate as many external factors as possible, to improve their chances of making a difference in the race. Having the same bike, the same tires, the same suspension, the same brake, all that leaves more down to their own talent, and therefore gives them a better chance of winning, they feel.

All these factors drive the market inside a motorcycle racing paddock towards a single solution, creating a de facto monopoly. Instead of buyers allowing sellers to compete among themselves on price and quality, the buyers - in this case, the teams - compete against each other to secure the services of the prime supplier. With virtually no competition, sellers are free to charge what they want, and to charge a premium for special customers - though to their credit, the margins being generated could only be described as generous, rather than unreasonable.

One mark of how distorted the market is can be seen on the swing arms, fairings and mudguards of the MotoGP bikes. Not all of the stickers promoting manufacturers of suspension, brake components, chains, etc are paid for. For some brands, having the sticker on the bike is part of the deal in being allowed to purchase the parts. In other words, the teams are paying twice: once for the components, and once in terms of sponsorship space.

Creating a more open market inside of motorcycle racing is not simple. The bars to entry are high, as even established names such as Showa have found. As tire and chassis design evolves, other components have to change to cope with the different challenges being thrown at them. The best tool to helping adapt to those new circumstances is data, and lots of it, but the only companies with any data are the existing suppliers. Showa struggled at many circuits, as they had only the Gresini team in both MotoGP and Moto2 to work with. At some tracks, the suspension worked well; at others, it did not. Ohlins, on the other hand, had a huge amount of data in almost every class to work with, as they had so many riders on so many different bikes.

Each year, Ohlins gathers yet more data, on both the existing and the previous generations of tires, engines and bikes, allowing them to create a benchmark against which to measure any modifications they might make, and giving them a competitive advantage from the start. Any team using Ohlins knows that the Swedish suspension firm can provide them with a workable baseline to start from, needing only fine tuning to perfect. Newcomers do not have the masses of historical data which Ohlins does, and so face a much more difficult task in finding a baseline setup. Without that baseline, teams face a lot more work at every circuit, to assemble the data they need before they can even start working on chasing the final few tenths of a second.

The entry of WP into Moto2, with Sandro Cortese in the Intact GP team, should make for an interesting test case. WP already have a lot of data from their Moto3 season with KTM, but moving up to Moto2 sees them start from almost nothing again. WP clearly have the technical ability, but will face serious challenges in 2013, with just Moto2 rookie Cortese using their suspension.

Capping prices will do nothing to solve the 'data gap' faced by suspension and braking newcomers into the MotoGP paddock, of course. The only way of solving that problem would be to make the data already amassed by the existing manufacturers available to newcomers as well, but this would meet with justifiably fierce resistance. Existing manufacturers such as Ohlins and Brembo have invested a lot of time and money in gathering and analyzing that data, and the lessons learned have also found their way into consumer products. Such data is clearly commercially sensitive, and it goes far beyond the remit of any race series organizer to demand that it should be made freely available.

And that data is one of the reasons why the greatest fear of opponents of a price cap is probably unjustified. Capping prices on components may reduce income for the component manufacturers generated by selling to teams, but that income is not the main reason the manufacturers of all sorts of components go racing. There are two main motivations for taking part in competition: marketing, and research and development. The reason that the suspension and brake component manufacturers request of their paying customers that they display their brand name on the bikes is because the exposure helps them build brand recognition and brand reputation. This makes their consumer products more desirable, and means that they can charge a premium on their products. The premium earned from thousands of consumer sales goes a long way to paying for participation in Grand Prix motorcycle racing.

But consumers will not pay solely for glamor (though arguably, they will: a massive proportion of the premium charged by luxury brands is purely down to the perceived glamor of the brand). They demand function alongside form, and the extreme environment which a motorcycle race unquestionably is provides an excellent arena for technological innovation, or at least evolution. While consumers are unlikely to use the full potential of Ohlins 48mm forks or Brembo monobloc radial calipers, the lessons learned from using those parts at the race track help improve the consumer parts. Stiffer brake calipers provide a more stable braking platform, something which is just as useful when slowing for traffic lights in the rain as it is when hauling up an RC213V for San Donato at Mugello. And while racing is not a necessary part of R&D, it is an extremely useful platform, and a challenging environment for training engineers to think on their feet and look for solutions in unexpected places.

Those two reasons, marketing and research and development, represent intrinsic value to component manufacturers. They provide a return on the investment the company makes, helping raise the profile of their brand, and helping improve and refine the products they sell to consumers. They are reason enough to justify participation in motorcycle racing, without requiring any direct financial return from the series. While existing manufacturers would clearly take another look at their racing budgets, they cannot afford to slow down the pace of development. If, for example, Ohlins were to decided to cut back on the development of their racing suspension, they would make it more attractive for competitors to enter. The gap which any newcomer faces would look a lot less insurmountable in those circumstances, posing a direct threat to the marketing benefits Ohlins gains from racing. Both Ohlins and Brembo have very good reasons to keep up the pace of development, regardless of the price they can charge.

An example of why price capping is unlikely to affect development can be seen in rider safety gear. The vast majority of riders in the MotoGP and World Superbike classes are sponsored by leather manufacturers, and pay nothing at all for their leathers (in fact, most riders are paid large sums of money to use a particular brand of leathers). The pace of development is high, with each brand making improvements in its equipment almost on a month-by-month basis. The past few years have seen the introduction of in-suit air bags as the most obvious development, but many smaller but equally crucial steps have also been made. Racing leathers fit better, dissipate heat better, are more comfortable, less likely to split open, and provide better protection every year. Brands such as Alpinestars, Dainese, REV'IT and Spidi make continuous improvements to their products, despite receiving no financial return from their riders. The return on their investment is in terms of marketing, and in technical improvements that help persuade customers to shell out their hard-earned cash for the manufacturers' products.

World championship motorcycle racing is an ideal platform for both marketing and for research and development. Imposing price caps on certain key components helps cut costs for the teams, but it also forces the manufacturers of those components to recognize the benefits they gain from competing. Price caps, kept at a level which is both affordable for the teams and helps cover a reasonable proportion of the costs for the manufacturers, are the best way forward for motorcycle racing.

It is much more efficient and effective to limit prices directly if you want to cut costs, than try to limit costs by imposing technical restraints. The first thing which teams and factories do with the money saved by imposing technical restraints is spend more money trying to work their way around the technical rules. The second thing they do is spend more money in other areas, which then require more rules to contain costs. Prices are a lot easier to control than technology.

Will price caps be completely effective at controlling costs? Probably not; the law of unintended consequences means that teams will continue to spend as much money as they can get their hands on, and the rich teams will continue to beat the poorer teams. But a price cap will do exactly what it says on the tin, to use a common phrase. Direct costs for specific components will be limited. That, in itself, is better than some of the other rules which have been brought in to try to achieve the same objective. And that, in the long term, is a good thing for the sport.

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In the last edition of the German Bike Magazin "PS Sportmotorrad" was a serval pages article stating that Corse is in fact using KTM owned WP suspension.
The articel included several photos from Corse with his new Kalex in Almeria, clearly featuring WP suspension.
The articel was rather interresting and going into some technical differences between WP and Ohlins.
The Ohlins fork, as most others, have both slider bearings fixed to the outer tube, hence constant distance between them.
WP has the lower bearing fixed to the outer tube, but the upper one fixed to the inner tube. Hence under hard breaking, the distance between the two bearings is greatest, when needed the most.
WP also uses Aluminium instead of Steal for the inner tube. WP developed a new coating for the Aluminium. There is reason to believe that the thicker, but lighter Aluminium tube, will help solving the shattering issues, most GP and Moto2 team experience these days.

On the shock WP also goes a different way, with bigger piston rods and pistons compared to Ohlins.
I whish them all the best and really hope that we will have some more competition on the component level.

Now if only WP could drop their terrible rasist name.

The team have dropped WP as the deal was not good enaugh. As a development team they would still pay for the the product they would be "testing". So they pay some extra and get the Öhlins instead. Thats the latest inside news from yesterday..

Thanks Axxexs for the update.
It's a real shame that we are back to an Ohlins monopol. I have nothing against them, in-fact use them myself on some of my bikes, but it would have been great to have some different technical solutions.
I read some time ago that Ohlins never gave any suspension away for free. Apparently for all those years, for all thoses differnet classes off-road and road any racer had to pay if they wanted to use Ohlins. If that is true I guess they got market dominating enough at a time when that was still possible without give aways.

When Yamaha did own a big part of Öhlins they couldnt give away things for some reason. But from 2007 ( I think it is) when Öhlins bought that part back they are more free. I know 2 riders that got free suspension from them after that. But its in national level. In WGP everyone have to pay becourse they can pay for it.

The WP and Showa situation emphasis the point well made. Data collection and base setup. When Moto2 replaced 250 strokers,I figured it would take a short season for money to determine bang for the buck. You are pretty much locked into the engine, but the loophole was always going to be a battle of running gear. The cream rose to the top and the rest fell by the wayside. As expected, an FTR chassis in its inception was a level playing field. The cream then got 'factory' backing,whether FTR,Suter or Kalex. This state of play will remain unless price caps are enforced on component level.
One alternative would be to enforce all manufacturers to produce everything 'in house',from motor to chassis to suspension and bring back the tyre war.
Of course that won't happen and is unrealistic as it would encourage monopolies.
Audi/Brembo/ducati,(deliberate that one) and Ohlins on one side vs HRC/Showa/Nissin. That situation would alienate Yamaha just as it has already alienated Suzuki and Kawasaki.
Waiting in the wings re-price caps. Any bets the Chinese will fast track their way into MGP. Their 650cc sport bike is a lovely machine,seriously.

Does Gresini pay for the Showa Suspension?

It may take free parts to get another vendor in the door, much like the leathers and helmets for the riders. You still have the rider thinking "I can't win without xyz parts" though, so there is no real answer IMO.

I am certain however that the reason BMW, Kawasaki, Suzuki (insert manufacturer here) are not in Moto GP is not due to the cost of suspension or brakes. For a factory squad the money spent on those parts are a drop in the bucket.

There is a better way to control costs.

Ban Traction Control, Launch Control, Wheelie Control, Anti-Spin, and Turn by Turn mapping. None of these are needed and cost the entire sport millions. Want to make the bikes cheaper, ban this shit and watch the cost drop overnight.

When riders can't do wheelies and burnouts due to Wheelie Control, Engine rules (5 per season is a complete joke), etc, perhaps you need to re-think the entire thing.

How about they (the MSMA) create a R&D series for themselves. Nobody will watch it or attend. Then let us have MotoGP back where the bikes slide, the tires smoke, and the riders have to do everything themselves.

This is getting insane. The biggest expense for MotoGP is electronics. The biggest factor affecting a drop in fan attendance of the rounds and viewership on TV, is electronics. So not only are they the biggest expense in the class but the biggest factor in reducing the show.

How about 10-12 engines per season, ban all the nannies, and give the factory bikes 24-25 liters of fuel. Cost would go down, show would go way up. And when the show goes up, more fans attend, more fans turn it on the teli, then more sponsors come calling to contribute because the cost of admission isn't so high. Then watch some new mfr's come into the class because the costs have been reduced and companies like Honda can't simply outspend everyone else.

That is the obvious solution but what are they doing? Everything but. Pathetic. Nothing is going to change, it's not going to get better. In a year or two they'll be scratching their heads trying to come up with some other price control that won't work either. The real solution is known by the common fan.

Good on ya BSB, leading the world in rule sets. Hasn't slowed them down or led to a bunch of deaths and injuries neither.

Roadracing World just did a great article on BSB on what the AMA can learn from them. Their use of electronics obviously was discussed. It was noted that the number of high sides shot through the roof (no pun intended!) so I can only imagine what these modern 1000s would do to the riders in their current state of tune. Gears - everyone would look like Lorenzo in his rookie year!

But I think you're right and it would force the bikes to be dumbed down enough to lose the rider aids.

You have a good point, and the first step in controlling rider aids is spec ECU, which Dorna is has been pushing for a while.

With spec ecu Dorna can tightly control exactly what would be allowed, and could enable/disable aids pretty much hour to hour if need be to fine tune it based on teams' feedback for any particular track or condition.

It was a good idea 2 years ago and it's still makes sense.

Cracking post BrickTop, but far, far too sensible to register on the Dorna/MSMA radar. I'd go further and open up the regulations to allow a return for 2 strokes (with clean technology), wankels, winkles, anything at all. The more types of engine the better. The Big 4 (or 2 as they're now known) plus Ducati will stick with 4 stroke 4s (yawn) whilst others could conceivably hook up with companies like Orbital and create, create, create. Let's make the whole show a lot more interesting because it's heading down the tubes big style at the moment. And yeah, bin the 'lectronics.

SO tired of the "get rid of the electronics" mantra. Perhaps asking some of the people in the BSB paddock - or just reading what people like Simon Buckmaster said just yesterday on this very blog - about the "cost savings" associated with spec electronics might put that simplistic idea to rest.

morbidelli17 you are going to continue to hear it. Not from me, but from others. The last truly great season the sport had (premier class) was 2006. Ever since the 800's began it's been a technological nightmare. The bikes have turned into slot racers, one line around the track. Just too many electronic controls keeping the wheels in line.

I should have prefaced my previous post with the fact that I don't work for the MSMA and don't own stock in their companies. This is entertainment for me and entertainment only. I have no vested interest in electronic nannies and I'm an avid sportbike rider. My engine in the garage (Crossplane Crankshaft) is tractable by design. In fact, V-twins, V4's or virtual V4 (crossplane) grip the tarmac a little better than inline 4's due to firing order. That is all that is needed, even with a 200 HP machine.

People have said banning nannies would dumb down the bikes and I say they are already dumbed down right now. All the rider aids have dumbed them down. Go watch the 2006 season, or 2005, or any of the previous 1000cc era (really 990cc era) 4 strokes. And contrast that to a 2007+ season. There is a very big contrast and difference. Until the bikes slide again, wheelie again, and tires smoke coming hot out of a corner the sport will remain dumbed down. Cathcart rides all these bikes and it's amazing when he says that anyone could ride a GP bike. That doesn't mean anyone can ride it as fast as a premier rider, it just means even me with my sandbagging, novice pace, could throw a leg over one of them and do laps without killing myself. This used to not be true.

I'd be willing to bet if a sanctioning body such as the FIM introduced a new world bike series where all riding aids were banned and the only rules were 1000cc's for X laps at X track, that series would slowly win fans the world over.

Think about it like this. Pick another sport, don't care what it is. Let's take Rugby for example. Tomorrow the Rugby rules change where all these men have to wear protective helmets, pads (No I don't mean American Football type helmets or pads) and instead of tackles and hits, they use tags or ribbons. Tackling and hits are forbidden and they now have to grab the opponent's ribbon instead. What would that do to that sport and how would the fans react?

What about Football (soccer for you US folks). What if tomorrow contact was outlawed completely. You touch another player in any way, and you are kicked out of the game. You see where I'm going with this?

4 strokes ended the nasty 2 stroke powerband so by design these bikes are safer, due to a linear powerband. Colin Edwards says the tyres are so good that the tyres are literally trying to suck the bike into the tarmac, they grip that well. Why do we need all the nannies again? All those millions spent would be better spent on protective gear as TC is smoke and mirrors. The MSMA touts it as safety but you'll still highside to the moon with it. The overwhelming majority of TC is simply for faster lap times, not safety. Until the MSMA is checkmated the bikes are going to continue to be technological nightmares where the factories slowly take away rider duties and code them instead of allowing human intervention. Until these nannies go away, the sport is going to continue to lose fans, sponsors, and attention. It's just not nearly as exciting as it used to be. It will take decades for those of us who remember how it "used to be" even just 6-7 years ago, to die off.

I shudder to think what all these nannies would do to motocross. The motoX bikes no longer getting crossed up, no more multiple lines through a corner, only one line, no sliding, no nothing. Electronic rider aids continue to ruin the sport.

Based on the votes on my post, I'm guessing I'm not the only one who feels the way I do. But I'll go ahead and answer.

Ban electronics? You may as well pine away for the days of spoke wheels and "Featherbed" frames. Do you really think the reason people watch or don't watch MotoGP is because of the amount of smoke coming off or not coming off the rear wheel? You could, I suppose, make the sport more entertaining by randomly oiling down part of the track or arming the riders. See where I'm going with this?

I really think that people look back through rose-colored glasses and forget what actually was happening on the track. That "golden" era you talk about was chock-full of electronic nannies. You don't honestly think that those MotoGP bikes of 2005 had no electronic rider aids, do you? Jesus, the lowly AMA Superbike series was all traction control by that point. And have you looked at the margins of victory for those early MotoGP races? Dude, Honda won the first nine MotoGP races in a row, and 14 of 16 that year! There were only four race winners in 2002, in 2003, in 2004. It's almost always been this way. I hit most of the 500cc GP races at Laguna, and there was NEVER a dice down to the line.

You might as well complain that radial tires or "big-bang" 500cc engines or disc brakes "ruined" the sport. No manufacturer wants to race bikes without electronics. Complain all you want, it will not happen. Without them, there is no GP racing. Ban electronic rider aids, and they will spend twice as much to come up with some other way to mimic the effect. You can't un-know something.

And by the way, the teams I know of that race that crossplane engine that you praise are the first to complain if you talk about taking away their electronic aids. Give Shaun over at SMR Racing a call in the BSB paddock and ask him about what he thinks about the spec ECU requirement for his "tractable" machine. Ask Keith at Yamaha/Graves what he thinks about losing his advanced electronics.

I get that you see racing from the end user's perspective. But that's not the only perspective that matters.

We all know nannies existed then (990cc) so you aren't telling anyone anything. Those systems just weren't as intrusive as they are now. And saying that, that doesn't mean going back to spoke wheels or anything else, it means ban TC. F1 did it, BSB sort of did it. So it's not like the request is from outer space. The premier domestic series in the world of m/c racing and the top cage racing championship in the world banned it yet many GP fans request for the same is out of line to you? Did F1 roll out 1960's or 70's GP cars, no. Did BSB go to spoke wheels or "featherbed" frames? No. Let's get real here and dispense with that nonsense.

And I'll play your game. Call up Graves and talk to Chuck or ask to speak with Josh. He won b2b AMA SBK titles with 0 TC. They only added it for the 2012 season.

As far as the RC211v dominating? Pretty much common knowledge that Honda duped everyone into allowing the same weight penalty for the 5 cylinder. It didn't dominate due to Traction Control that much is for sure. And during the 990cc era, you'd regularly see the bikes over riding the tires and sliding, smoking, etc. Again, those TC systems were miniscule compared to what is on these bikes today. For reference go back and watch Portugal 2006 where Elias was sliding the RCV from one edge of the track to the other down the straight. That could not be done now and that is what is wrong. They had more fuel, the nannies weren't as intrusive, so the riders had more control in their hands. I'm sure the laptop jockeys got paid heaps less back then because they just weren't as important as they are today.

And the end user is why the series continues. TV viewership, and in person attendance at the circuits. Without the fans you don't have a series and it's high time they became the focus instead of the MSMA's R&D or their bs justification reasons. They race in this series to sell motorcycles first and foremost. R&D is their excuse. They all own their own test tracks and employ their own test riders. The test riders can test anything underneath the sun there so they don't need GP to do it.

Just about every GP journalist (including this site's owner and reporter) reported how boring the 800cc era was, the riders said the same. The riders, the overwhelming majority, have also been asked about TC and they say ban it too including Casey Stoner and Valentino Rossi. I'm not the only one. DORNA wants it gone too and the only reason they haven't banned it is because of Honda's threats to leave.

I do talk to those guys on a regular basis. But don't believe me - look up Keith McCarthy's comments on the AMA's proposal to get rid of TC. Riders love to talk bravado publicly, but privately, they sing a different tune - as Josh did the one and only time he got to ride a MotoGP bike. Look up the comments Hayes made at last year's IMS show in Long Beach after actually riding an M1 at Valencia. He was quite happy to have those "nannies" on board!

If you really think Yamaha's AMA team was running zero TC in 2010 and 2011, I've got a bridge to sell you. I guess they were flying the Magneti Marelli technician to the races because they liked his ability to cook Italian food. And I don't know why you think the weights were the same for all MotoGP bikes at the beginning of the formula. A quick Google showed that weight limits were indeed different for different cylinder configurations.

Point is, you can't go backward. BSB has merely driven development in a different direction - and the funny thing is that now, of course, it's all in other parts of the electronics. And it didn't do anything in terms of tightening up the show. F1 banned TC and teams just went crazy with exhaust routing and underbody configurations to mimic the effects of TC. You can limit development in one direction or another, but you can't stop it. If Dorna thought that all you needed was smoking tires to bring the fans back, they could just mandate shit tires and be done with it.

Banning electronics would do little to reduce the costs of the bikes, piss off the manufacturers who participate in the sport, and do little to close up the competition, in my opinion. And that's based on what the pros who work in the sport say.

Why SBK 2012 season was one of most performing and thrilling if there is no limits of electronic aids?
Sliding bike or smoking tire is not coming from intrusiveness of TC in racing use. It all depends of slip angle of the tire. If racer is faster when sliding /and tire allows it/ then TC is programmed to have proper slip. The same with turning the bike. It is all about we want to see. Spectators wants to see more crashes and riders injured - remove TC. If spectators wants to see who is faster rider - leave it. There are many circuits with very uneven grip at one lap /for example Misano, Silverstone `12/ or tracks that are really dangerous in mixed conditions /ie. Monza `12/. Beside that TC is cheap and free electronics allows smaller suppliers to come up with new, competetive ideas /as well as electronic technicians from smaller teams/. With ECU/parameters restrictions - big money is needed /and many calculations, programs etc./ to fight for that last 0.01%. There is no place for passionate geniuses and innovative ideas - only for "part per thousand plant". Remember Harris WCM story? All TC-like solutions that will come just after banning TC costs A LOT more...
If rules will allow quickshifter, pit limiter or anything that cuts/reduces power and let say OEM pressure sensor in airbox - then... with bunch of money and many calculations done by many additional experts - you can make TC working well.

You realize that Dorna have forced a spec ECU on all competitors in 2014? The software is free for factory teams, but spec software will be used by all "CRT" (which means nothing now) participants, along with 24L of fuel.

Yes. But the "spec" ECU still will allow factories to write all their own software with all the current functionality, as I recall reading the agreement as reported here. So MotoGP isn't getting rid of TC, wheelie control, course mapping, etc. As far as I can tell, Dorna may as well have just told the teams to change the color of the ECU box. OK, a bit of an exaggeration - but not much!

But that raises an interesting point. What exactly will be the functionality of the "spec" CRT software? I mean, if you think the gap between factory bikes and CRT bikes is big now, what will happen if the "spec" CRT software doesn't have TC, wheelie control, course mapping, etc?

You claimed a spec ECU isn't even on Dorna's radar. In fact, Dorna have utilized a spec ECU in 'their' rulebook (the 24L rulebook for 2014). They also imposed a spec ECU on the factory teams, regardless of whether or not software is free.

Spec ECU is obviously on Dorna's radar, and the spec ECU battle has been going on for quite some time.

What will be used from 2014 is a spec electronics package. This will include an ECU, sensors, and most of the wiring. This will allow Dorna to control what level of electronic control is possible by removing sensors, such as gyros and accelerometers (the main components in TC and anti-wheelie). They will not remove them, at least not in 2014 or 2015, but it becomes possible.

As for the CRT / 24 liter teams, they will have software written by Magneti Marelli at their disposal. The idea is to give the CRT teams the same level of control as the factory teams, the difference being only the extra ingenuity / manpower supplied by the factories. The aim at the moment is to give the CRT teams the best software which Magneti Marelli can create, including launch control, traction control, anti-wheelie, etc. The difference is that the factories can focus on a single bike, whereas MM must write software for a range of bikes and engine configurations.

Exactly. It's the software that matters to the manufacturers, and as long as there is enough hardware to run said software, I suspect they really don't care what name it says on the outside of the box.

Question: So for 2014/15, no changes to external sensors (which, as you point out, are what drive ultimate ECU capabilities)?

As I understand the current situation, there will be no change to the sensors for 2014 or 2015. This is all dependent on the MSMA members supplying sufficient 'CRT-replacement' bikes, however. If Honda don't build and supply the production RC213V, and Yamaha don't allow teams to lease M1 engines, the deal is off.

Which is as it should be. The best way to make a better show is to put together a solid, competitive grid, and forcing the manus to put decent bikes in the hands of satellite teams for a reasonable price is probably the only way to make it happen. If the manus play along, and MM puts together a decent electronics package, we are in for a good season ...

This is where the next round of negotiations starts, IMHO - what sensors are banned, which ones are retained, the raw computing power of the ECU. In a perfect world, you limit all of that to whatever a manu has on their hottest street bike, and let them do what they want with software - that would drive development along lines that actually would be useful on the street. And it would prevent them from just piling on more sensors and bigger computers to get a performance gain - you make them do less with more. Limit it to their street configurations, and you help avoid what Cos - brilliantly, I think - refers to as technological dead-ends, systems that work only on the racetrack.

Make sure that MM or Motec has a good baseline software for the production racers, and you've got a formula for a solid grid.

Looking back in history, F1 survived and thrived when a solid powerplant was available at a reasonable cost to all. The absolute best version wasn't available to everyone. But it was good enough that you didn't embarrass yourself. It's not a bad analogy here. Whatever the manus want, Dorna's unrelenting response should be, OK, what are you going to do for the rest of the grid? Build some proddie racers!

One point I would be interested to hear opinions of is whether the banning of GPS based TC would be an ideal compromise? GPS TC has no practical application outside racing and simply costs huge sums of money or is an area where smaller teams suffer. Removal of said systems would seem a first solution. Although, no doubt it would throw up other issues as yet unforseen.

GPS is banned in MotoGP. They are not allowed to use any GPS signals to locate the bike. The only GPS on the bike is that provided by Dorna for the TV coverage.

The banning of GPS has raised costs, as the electronics engineers have been forced to write algorithms to work out precisely where the bike is on the track based on a number of engine speed, gear, lean angle, wheel speed and calibrated using the timing loops under the track (the track is divided into four sections. A loop runs under the track, which is triggered by the transponder as it crosses that point. The bikes have a sensor to pick up the timing loop, they use that signal to pinpoint their position on the track, and reset any drift which has occurred in their internal maps of the circuit). As with the seamless gearbox, the workaround for a banned technology turned out to be more expensive than the banned technology.

GPS-based TC is coming to a vehicle near you soon. GPS mapping is ubiquitous, and so managing vehicle dynamics based on vehicle position is an obvious step. If the vehicle knows that it is coming to a blind turn which is sharper than it looks, it can turn up traction control to intervene more if the rider/driver uses too much throttle thinking the corner is less tight. Add in the trend towards networked vehicles (which Audi is experimenting with already, and which will be sold commercially from next year), allowing information to be sent to and from vehicles on the road, and you have the possibility to have live updates on grip levels as well as a map of the road. GPS-based TC is a technology that is directly applicable to road vehicles, I believe.

MotoGP as we know it today needs to crumble before any of the sensible solutions mentioned above are taken seriously. Or fail enough to allow a new series to begin to take shape. Now that WSBK has been folded into this mess, where is the competition there?

Well, if reigning in costs leading to parity is what you want, then this is the best approach I've heard to date.

However, it's funny, I'd bet there will be a lot of people who will lament the loss of the juggernaut rider/team if more people are winning on a regular basis.

Years ago, before the Salary Cap in the NFL, there were only like 3, possibly 4 teams with any hope of winning the Super Bowl. Now with parity the "law" of the league, wildcard teams with only slightly above average records having won the Super Bowl on occasion, the biggest complaint you hear is there are no dominant teams, no dynasties. MWAH!

Interesting read, and I think overall price caps on certain components aren't such a bad idea. I have absolutely no idea why, for example, aftermarket wheels are allowed in Superbike racing.

But when it comes to suspension, electronics, chassis bits, even bodywork, the R&D costs associated with getting into the game are far greater than the costs associated with developing leathers. (As an aside, those spiffy new inflatable leathers only exist because of the massive computing and data collection capabilities of the modern GPS and ECU systems that people love to criticize.)

And entering into GP racing requires the development of a support infrastructure - that means personnel at the track, a support vehicle, inventory on hand, a small workshop in that vehicle for suspension companies, etc.

Under a price cap system, you might find a suspension, brake or chassis company already in GP racing move up a class. But I suspect that without being able to invest in a superior product and charge more for it, companies not currently racing in GPs are not likely to jump in.

Still, not a tragedy to make Ohlins and Brembo stuff more affordable!

I do agree with you Brick that the electronics cost a fortune to operate. It's not the hardware that's expensive, it's paying the uber nerd to do the programming.

You (we) have to determine the purpose of Moto GP. Is it the fastest riders on the fastest bikes or is it a show? Rarely does having the fastest riders on the fastest bike produce a season long "show".

Dorna can dumb down Moto GP. No rider aids, period. What does that do to the status of WSBK? IMO without the electronics Moto GP ceases to be the fastest bikes on the planet. So again, IMO, someone has to make a decision on what is important. The top riders are in GP because they want to race the fastest bikes against the fastest riders.

But I do.
It could be because as an American the notion of price controls is unappealing or it could be because I am in business or it's probably because the two are tied together. But this has zero appeal to me.

First, I do agree that racers are a paranoid bunch which compels them to suffer from the "group think" mentality. So in that respect, most of this is self-inflicted pain. Needing to be on Ohlins when Showa is Honda owned and capable is beyond me. The fact that Bautista's bike is not equipped with the same electronic package or that his motor upgrades may lag the Factory bikes should be where blame is laid. Said another way, if Bautista was fast enough, he wouldn't be on a Satellite bike in Spain Crazed MotoGp if he were able to be on a factory. Why aren't teams running K-Tech? They're making a name for themselves in SBK but no one would dare run them given none of the aliens are using them.

You don't have to go very far to find other great examples of rider paranoia - just see Eric Buell. His bikes have been ugly, but he puts together some great engineering ideas and has won, he just can't get market share or scale. Riders are not willing to put their leg over an american sportbike (that's changing now given his new superbike is doing well in AMA).

Second, high prices do not equal high returns. Currently, Brembo has a 4% profit margin according to their 12/31/12 financial statements. High prices in competitive markets such as this reflect use of exotic metals, testing, development, manufacture and engineering costs. High Risk should equate high rewards and they should be entitled to make as much as they can. And Ohlins sees roughly 53mm euros in revenue, not exactly Warren Bufffet.

Regardless, these two organizations are winning because they made enormous investments into their own companies which has allowed them to develop into industry leaders. Capping someone's ability to be adequately rewarded is a terrible idea as there becomes no reward for exceeding expectations in a given space.

Lastly, this ultimately becomes a game of follow the talent. If Brembo is told how much they can make, it means wages stale, man hours are reduced and talent walks out of the door to down the street to the competition. Think this can't happen? Continental tires are beginning to make real improvement to their tires here - you see a lot of their rubber at trackdays and on some S1000RRs. Why is this? Because the lead guy from Pirelli walked out of the front door.

And we can argue about cutting electronics or this vendor charges too much, but as Roadracing World Magazine reported in this month's issue, the real cost for a team are the logistics involved in a GP calendar that has no rime or reason to and getting their teams and equipment around the globe in an expedited manner.

If DORNA seems so willing to put their hands into the wallets of their vendors, why aren't they kicking real money into teams in order to grow the grid and stop the parade? How much does Bernie kick in to each smaller team? Rumors indicate it is in the 10s of millions.

"High prices in competitive markets such as this"

That's the problem though, it's not a competitive market. Off-the-shelf supply and demand capitalistic theory breaks down in monopolistic markets or markets where the products sold are not commodities. If brembo is perceived to be the only brake manufacturer to be capable of producing acceptable brakes, added to the fact they're one of the few companies who actually make competitive brakes, then how can a team(s) make rational purchasing decisions in a classical model? How do you put a market-based price on perception and supremely limited supply?

You have to do it artificially, through regulation.

This is already what happens. Dorna supplies about half the budget of a satellite team, and about a fifth or a quarter of the budget of a factory team. This is one of the reasons why Dorna wants to cut costs: at the moment, the component manufacturers and factories are doing R&D on Dorna's dollar. Capping prices does not cap costs, but it does mean that component manufacturers are forced to look at their own R&D budgets, and using those to subsidize racing, rather than using income from racing to subsidize R&D. 

Interesting anecdote: at one point, the GPC was discussing banning carbon brakes and using steel instead. This would not have saved much money (top WSBK teams get through a lot of brakes too). But when they heard about the proposal to scrap carbon brakes, Brembo immediately spoke to Ezpeleta about it and offered to reduce the price of components by a significant margin. That means they had margin for movement, and this is merely a formalizing of that proposal.

The other part of your comment, about risks vs rewards and the operation of markets, only works in large, open marketplaces. Motorcycle racing paddocks are tiny marketplaces suffering almost by design from groupthink and herd behavior. As a consequence, the market is massively distorted, with competition among suppliers virtually eliminated, and replaced by competition among purchasers (in this case, the teams). 

Isn't salary more approriate? The teams and riders are putting on a show that Dorna makes money from. This is money the teams and riders have earned and are very deserving of. Use of the term subsidy tells me that CE thinks the money he pays to the teams is something he'd rather eliminate if possible.

I'd say that at least 1/4 of a factory team budget is travel and marketing expenses. Why doesn't Dorna think that his money paid to them is well spent since it creates very high profile participants in his show. Instead he begrudges the money he gives them and feels that he is funding their R&D. Talk about being penny wise and pound foolish.

The terms used and how they feel about how funds are disbursed may seem like a small issue to complain about but it is the perspective of Dorna that in my opinon is degrading the sport. If his perspective is that he has to give handouts instead of paying participants then he will have little to no respect for the people who create the value that he takes to the bank. The fact that the bank then takes most of his profit to fund debt payments is not a problem created by the teams.


I used the term subsidy. Whenever Ezpeleta speaks (in both English and Spanish) he uses the word "pay", e.g. "I pay the teams," "we pay the factories." Make of that what you will. But the impression I get is that he is very happy to pay the teams. And he would be perfectly happy paying the factories, if they were willing to help him create a product which people (by which I mean the millions of casual fans, not the few thousand hardcore fans) want to pay to watch.

The riders are subsidized. Not long ago, we found out that the 'Brit contract' was worth $2M or some such b/c a British rider was deemed necessary for the BBC TV deal. I'm sure RDP is getting money to carry the French flag. I believe there were reports tat Dorna helped get Bradl to Gresini on a prototype last year. Edwards was almost certainly retained by Dorna to develop CRTs at Suter. Naturally, Edwards turned into a CRT salesman last season.

Rossi is probably on the payroll. Why do you think he used to constantly rattle sabers about going to WRC, F1, and WSBK? He's shopping around his brand b/c other promoters are willing to pay him to bail on MotoGP.

Is there a compelling reason for why, when Dorna has to support teams from 'folding' (as opposed to paying to participate), could they not include in any package a contractual obligation to operate alternative suspension/brake/other components? Or is there other issues which makes that unmanageable?

Dorna place cost caps on the MSMA by offering them a set amount of revenue sharing. The manufacturers deficit spend. The corporate boards tells the MSMA execs to cut costs, and we end up with technical restrictions anyway.

Racing trends towards equilibrium monopoly and technological communism b/c racing is a mercantile contest for participants who derive their profits from non-racing activities (e.g. the MSMA). Cost caps are ineffective for stimulating competition unless the governing body is manipulating direct-profit from MotoGP activities (almost impossible). The suppliers might be a slightly different situation than the MSMA b/c they operate primarily in B2B channels, but I suspect the end result will be similar.

The problem cannot be solved without getting to the roots of economic philosophy. Why do we have markets? To assign price for easy exchange/contract, to foster competition (technological progress), to solve existing problems. Honda realize that making the sport more difficult (26L>24L>22L>21L>20L) creates technological progress. Unfortunately, increasing the expense of a loss-leading activity also eliminates competitors. If the sport has few competitors and little competition, people do not see sporting credentials or technological progress, and they do not watch. NASCAR have realized that dispensing with technological competition reduces costs and increases competitors. Unfortunately, NASCAR is not really motorsport in the classical definition, but it succeeds as reality TV. Obviously, commercial rights people are going to take notice of NASCAR b/c it sells. If the manufacturers want to maintain control of the rules, they have to prove that motorsport is a viable business, not a club sport for wealthy corporations.

Safety equipment is a good example of how motorsports should function. The safety equipment manufacturers are not governed by the race or the activities that happen on the race track. They are trying to decrease road fatalities. They are working to meet regulatory standards and insurance standards. They are developing new products to sell to motorsport organizers, street riders, and vehicle manufacturers. Their work is governed by something other than the simplistic economies created by intentionally losing money to obtain victories.

As I have opined before, the artificial market of MotoGP should be a fuel index or fuel schedule. It has already subconsciously formed. Dorna want 24L and spec ECU b/c it is cheap. The MSMA want 20L and prototype ECUs b/c it is an engineering challenge. These two 'poles' need to be connected with a single formulaic system, which makes fuel adjustments based on historical success. The racing will reflect the index, which is designed to be competitive, technologically advanced, and cost-flexible. The financial rewards of the sport should be focused on the competitors who operate on the leading edge of the regulations.

Such systems are already in place in other motorsports. For instance, BTCC uses success ballasting. Unfortunately, touring car racing does not use ballast to improve technological sophistication or competition between manufacturers (instead drivers are ballasted). However, the impact of ballast on the racing spectacle and the racing economy is easy to observe.

BTW, I appreciate the article, though I do not necessarily agree with the conclusion. Good discussion. I just wish people from the GPC would discuss such matters publicly.

Manufacturers, I assume, operate from budgets set in the boardroom but IRTA could possibly.

By the way, I agree with the idea of loss leaders but not sure about your statement on economic communism.

Technological communism is the practice of giving everyone the same equipment or equalizing performance, and I believe it is an empirical observation in modern motorsport. NASCAR is self-explanatory. Other motorsports like FIA GT3 stipulate that all cars, regardless of construction, shall turn the same lap times.

Like economic systems, the technical regulations are highly nuanced and extraordinarily complicated. Absolute lack of regulations is just chaos. Complete control of lap times and equipment is not racing b/c everyone would cross the line at the same time. In addition to the free-vs-restriction issues, organizers must consider production-vs-prototype or direct-sales-vs-marketing models for the factories. It's complicated to say the least, but I think a dominant trend is emerging. Organizers are adding technological restrictions to make the racing closer and reduce costs. The narrowly-defined universal regulations are a hard sell to the manufacturers. Broad technical regulations with narrowly defined performance is an easier sell, but only if the manufacturers are earning direct profits from racing (FIA GT3).

Regarding deficit spending, IRTA private teams cannot really deficit spend, and that is another interesting twist (or extraneous complication) in the plot. If Tech 3 receive $5M in revenue-sharing, sponsorship, and merchandising; then $5M is their racing budget. Private IRTA teams must profit (or breakeven) from MotoGP, which completely changes the racing economy. If the MSMA receive $30M in revenue-sharing, sponsorship, merchandising, and licensing; they can still spend $50M per season b/c they sequester corporate funds from advertising, marketing, and R&D budgets. Perhaps this explains why Dorna and IRTA have a sort of alliance. It is less about friendship and politics, and more about the economic system that IRTA and CRT regulations represent.

Many racing series have 'banned' factory participation using various methods. For instance, FIA GT3 has no manufacturers championship and the cars cannot be modified (other than basic setup). Both of these rules essentially mandate participation by for-profit private racing teams. Such methods are basically impossible in prototype racing, thus, people like Max Mosley (former FIA president) suggested financial audits and budget caps to make factory teams break-even from racing activities.

The complexities inherent to racing are the reason Francis Batta (Alstare boss) said that racing is a microcosm for all challenges and rewards that exist in life.

I think "communism" is the word that's throwing me here. Aside from the actual definition of "communism," there's a big difference between spec-ing a part or the price of said part and the impact of that act on equalizing overall performance between participants.

Requiring a specific part or configuration may help equalize overall performance between various competitors, or it can actually do the opposite by eliminating the ability of a competitor to exploit a potential area of advantage.

Conversely, Ducati chose to enter MotoGP on a tire that virtually no front-runner was using in an attempt to close the gap to its competitors, knowing that if it used the same rubber as Honda and Yamaha, it would never catch up or surpass them.

I'm referring to the act of trying to equalize outcomes for the manufacturers by specifying parts and dimensions (NASCAR/DTM/V8Supercars) or negating the performance advantage of proper design and technology (FIA GT3/Grand Am).

Controlling the price of MotoGP parts is not similar to equalization of outcomes, but I pointed out in the original post that Dorna have already cost capped the MSMA by agreeing to pay a set price for their participation. The technological restrictions are still piling up b/c the cost cap does little to alter the competitive landscape for the MSMA.

Cost-caps are ineffective, and their primary purpose in monopoly situations is to shift costs. Dorna want to shift costs from IRTA teams, who are heavily subsidized by Dorna, to components suppliers, who are not directly subsidized by Dorna AFAIK. Shifting costs doesn't really deal with racing's major problems, like deterioration of competition (monopoly/oligopoly) or ever-tightening technical restrictions.

There's two things going on here, and I think they're separate: Specifying parts/configurations and manipulating competitive outcomes. I think the price caps are going to, in effect, do the former, but not necessarily have any impact on the latter (you don't need to manipulate or cap prices to do this, you just need some big honkin' lead weights!) Whether they're effective depends, I think, on how you define 'successful' or what the goal is.

But your last post brings up a truly fascinating point that I'd overlooked - that Dorna subsidizes teams. In other words, reducing the price of participation in MotoGP could either entice new teams to come play, or could - surprise - put more money in Dorna's pocket by allowing them to reduce the subsidy that they give to the teams, or some combination of both.

Ducati came into gp on Michelin which all other competitive teams were on at the time. They jumped ship for Bridgestone after a season or two to seek an advantage by being the manufacturer's primary client. It worked until every other team joined them at bstone.

True. I figured you knew that but just wanted to clear up the air for those who might be reading it and don't say anything.

thats a boring perspective, only one or two will always win.


wait.....isn't that whats happening? maybe they should line the grid with the fastest one on the last position and maybe then we can have a little bit of a race, for the first 10 laps at least.


It's all very well, but what proportion of a team budget is spent on brakes and suspension?

Is any team willing to give a break-down of their budget? In moto2 it seems that brakes, suspension and wheels are cheaper than frames, but what is the cost of the semi-trailer to cart it all about? More than a frame, I suggest. Then there are the salaries, travel and accommodation costs for the teams, and the hospitality suite. What is the chance that the reduced brake budget will be spent on hospitality?

It looks to me like just another restriction on technical variation and choices of allocation. It's not so long ago that there were 2 and 3 cylinder 500's trying to exploit lower weight limits to race against the 4's.
Now we have (or will soon have) in MotoGP:
Fixed number of cylinders
Maximum bores
Fixed rpm limits
Hugely bloated minimum weight
Fixed wheel materials
Fixed suspension budgets
Fixed brake budgets
Fixed engine life
Fixed tyre choices.
Fixed fuel pressure.

The only RD input is long-life lean burn engine design and traction control, which allows
absurdly powerful engines to provide less spectacle than a typical WSS bike.

The irony is that every one of the above restrictions was proposed as a cost-cutting measure, yet the cost escalation since the end of the 2-stroke era has been simply obscene.

Nicely said. I think we as fans tend to focus on the costs associated with the bikes because those are what we see on the TV screen and what we have in the garages.

New racers don't believe me when I tell them that the cost of the motorcycle will be a fraction of the cost of their first season.

Forgive me if this obvious, but controlling the prices for components only controls the costs for those components sold. If that is the goal, then fair enough. However, I suspect this is NOT actually the goal.

I suspect that goal is under-specified. It does not seem a useful goal, because it would be fulfilled by a component vendor giving their best parts to a few favoured teams for free, while giving less good parts to other teams - potentially at a range of prices. If *all* that matters is cost, then to take this to its logical, but absurd extreme, it would mean that HRC selling uncompetitive, neutered RCVs to teams at grandiose prices while retaining the best bikes for itself would be a desirable outcome. As this is the current situation, with which no one is happy, I think it's pretty clear that lowering the cost alone is NOT the goal.

I suspect most would agree the goal SHOULD be:

"Give all competitors an equal access to technology, for equal consideration".

The cost of the component is but one half of the equation - the consideration. The other half is the actual component, and its quality. You can either regulate the specifications for that component directly (as in other classes), but that is harmful to development. Alternatively then you must regulate for equal access.

You need not just a maximum price, but you need ALL teams to have EQUAL access to a part for that price. This means you also need MINIMUM BUILD rules. Further, when the minimum build is less than the number of bikes in the paddock, you need a system to allocate the parts fairly (e.g. random) in the event that demand exceeds the supply. This requires some party to act as a fair broker.

To be very clear: Price controls alone will not change the problem of suppliers favouring certain teams. If you're running a private team, it won't be very reassuring that the price you pay for some uncompetitive part is no more than the price any other team will pay, while the team beating you is getting a competitive part - potentially for nothing!

To achieve a goal to promote more open racing, rather than maintaining the status quo of the big manufacturers deciding the winners, you need to control BOTH the price of components AND the access to them.

These price controls don't even introduce any incentive to actually control costs, because the manufacturer can just set whatever price they want when selling to favoured teams, regardless of the actual cost of the component (inc R&D). This will be particularly impossible to do anything about with manufacturer owned teams.

To *actually* control costs ALSO requires a minimum build + fair allocation rule. Only with a minimum-build+fair-allocation rule will manufacturers have an incentive to charge actual market prices for their parts OR engineer the part so its cost is within the price cap, and only THEN will manufacturers have an incentive to control costs. At least, any subsidy they give will have to subsidise either the entire grid, or else potentially ANY team.

Basically, a price cap only really makes sense as part of a wider package of rules intended to fix economic competiveness in the sport.

Note: Actually, the price cap is the *least useful* aspect of such a package, and has the least effect. I wonder if this point - that it has so little effect - is the reason why this rule was agreed on and introduced! :)

Edit: little clarification on the market price incentive - reducing the *actual* cost of the component, where it is above the cap, is another option. If the supplier still chooses to subsidise the racing, they at least then can't favour any single team, IF there are minimum-build/fair-allocation rules.

Sorry I'm L8 (pun indented and all in jest). Its CF Moto's 650 clone of the Kawasaki ER 6 or something. The thing is this. Test reports claim its a little tacky in this area or that,but it is half the price. Equal bang for half the buck.
I remember many years back a movie called On any Sunday which featured Malcolm Smith,Kenny Roberts and Steve McQueen. One of the commentaters suggested Yamaha should stick to building piano's. The rest as they say, is history.

"Instead of trying to control costs indirectly and seeing their efforts kicked into touch by the law of unintended consequences, the rule-makers have decided to attempt to go straight to the heart of the problem."

Laws of economics are laws of nature. Price fixing typically results in shortages (see Thomas Sowell, Basic Economics, Ch. 2, Price Controls). In this cutting-edge environment I also expect quality to fall though exhibited through slowed development and as such difficult to measure.

So while the rule makers have reduced the price of some parts you have simply displaced the expense to another aspect of development. For example, in recent testing restrictions we witnessed a surplus of test riders and an excess of prototyped parts to rush through the team riders during official tests. Upcoming engine controls will see an increase in chassis research.

Once they've flattened the playing field technically, we'll be left with the only variable being the rider; and the same guys will still be winning by a country mile. Perhaps then we'll need rider salary caps?

Will the other restrictions on brakes be removed? It should be OK to open up the material and size restrictions since they were introduced to supposedly limit costs (yet another rule that did not have its intended effect) but now the cost is fixed. Maybe what will happen is that Brembo or someone else will start to develop brakes that can work wet or dry and also have volume production applications. Carbon/carbon brakes are a technological dead end that have been made the defacto GP standard though the regulations. They have a very high material processing costs and limited weather use and no mass production upside. Braketech sells CMC rotors that work wet or dry and are 1/2 the weight of cast iron but are not allowed because of the material restrictions. The material is used on a few high end car rotors and is available for aftermarket street use on cars too. Carbon/carbon? Dry racetrack use only.


When Alain Chevallier was running carbon brakes in 1984, before the factories, he also used them in the wet. I asked him about it when I noticed it in a photo: although the carbon works less well when cold, the coefficient of friction goes up when they are wet. Overall they worked just fine and his riders preferred them (although apparently JMB complained later, when he was told by someone else they shouldn't be used in the rain!).

However I agree that the material restriction are ridiculous : you can't run an aluminium or titanium axle but you can have aluminium fork tubes and steering stem. You can't use brake materials now available on a production Porsche. The materials used outside the engine have not really advanced since 1988 (except for the WP aluminium fork tubes in ... Moto3). Carbon wheels are now banned because... Spencer's accident on the NR500 43 years ago??! A lot of metal wheels have failed since then (the Oz forged magnesium rear on Maxime Berger's Ducati being a recent example).

None of the above has anything to do with cost. A titanium axle costs less than a pair of tyres. To quote Chevellier again "Titanium is cheap", compared to the cost of running a team. It's essentially what Simon Buckmaster said too: cost is travel, salaries, tyres.

Here's another perspective on what is really happening: the factories and major component manufacturers have no interest in competing on any territory other than where they already have an advantage. They don't want to get out of their comfort zone on materials or technology. So, ban innovative materials and fix the minimum weight so there is no advantage to trying anything alternative. Perfect way to close the market to newcomers.

Minimum weight is not an accurate control of exotic materials. The manufacturers continue decreasing the weight of components, particularly moving parts, and they place ballast elsewhere to improve handling.

The minimum weight is a way to open the market to newcomers b/c they suffer less disadvantage if they lack budget or if their innovations do not perform as intended.

Restrictions on materials are in place for two reasons: for reasons of cost, and for reasons of safety. Banning a particular material may make sense at a particular point in time while technology cannot guarantee that the failure rate is not below a particular threshold, and could therefore endanger the riders. But once such a material has been proven safe enough, it should be permitted.

There may be a better approach to safety, allowing materials to be used if documentation can be presented showing failure rates below a specific threshold, with restrictions based on elasticity, brittleness and shear strength, among other factors.

With that in place, there is no reason why a price cap should not take the place of a technical restriction. That would allow the development of affordable technologies, while restricting the use of extremely exotic materials until the price dropped sufficiently enough for component manufacturers to consider subsidizing a part of the cost of that material when passed on to the teams. Stipulating that a wheel spindle should only cost, say, 50 or 100 euros would be far more effective than saying that it should not be made of titanium.

Instead of this retro-justification of fixed markets, why not propose the one thing that actually works in the real world: remove access restrictions.

No more franchises, no more up-front full year contracts. No status-quo technology rules. Just a maximum capacity or maximum bore area (and if you make it smaller, the electronics will become less relevant).

You turn up, you run within 12% on Friday, you get to turn up Saturday. You run within 7% Saturday, you race.

Hell, you could even have prize money!

Thanks for the comments everyone. Many of you have commented on how large a component of the overall budget travel is. You are entirely correct, one way to make a genuine contribution to cutting costs would be to cut the amount of travel. But the trouble is that this is supposed to be a World Championship, both WSBK and MotoGP. MotoGP, especially, is concentrated very heavily in just a few countries (4 races in Spain, 3 in the US, 2 in Italy), and this is already causing charges that it is not a real World Championship.

If Dorna expands the sport across more countries, (especially countries outside of Europe) that raises costs. If they contract the number of countries the series race in, then fans complain that motorcycle racing's two world championships are nothing more than glorified national series, one Spanish (MotoGP) and one Italian (World Superbikes).

On April 1st of 2012, I wrote an April Fool story about all 18 MotoGP races to be held in Spain to cut costs. It was meant only half in jest. Having the series with a home base and restricted to a small number of tracks would radically reduce the amount teams would spend on travel. But it would make a mockery of any claims to being a world championship.

The real solution to MotoGP's problems is in raising income, but that is not easy at all. The current series, with its extreme emphasis on technology, imposed by the MSMA and accepted under duress by Dorna and IRTA as the price of keeping the factories in the series, is a very hard sell as an entertainment product. And as entertainment is where the vast majority of the series' income comes from (either in the form of TV revenues or in sponsorship, which is related to audience size), the only way of increasing those incomes is by improving the product, which means a greater focus on entertainment and less on technology. The alternative would be for the manufacturers to step up and fund the sport out of their own pockets. Lamentably, they have shown no appetite for that whatsoever.

Why don't they just remove all restrictions? I mean, just short of attaching rockets to the bikes for straightaway bursts. From a layman’s perspective (me) it would seem that closer to no restrictions is the answer. We are already relatively close to the maximum cc that can be efficiently thrown into a corner. Aren’t we? I mean, if they said, no restrictions on cc, wouldn't most teams stay close to the 1000-1200 mark? I have a hard time envisioning 1500's out there using the same lean angles. I mean the more you add, the less it corners at some point, right? And the teams that can't afford insane electronics packages could bump up a couple cc. Isn’t that much cheaper?

It’s the racing that needs to be preserved. The racing is what’s being hurt with all the restrictions. It seems to me the manufacturers can get all the data they need with the best riders out on a test track ALONE. As long as it’s the fastest guys doing laps, the other riders would just get in the way. They could hire stoner/pedrosa/rossi/spies type talent to go round and round and round and get all the data necessary to calculate partially opened throttle response, or whatever else they are looking for. Then each company could post on a "bragging list" so all the people interested in the TECHNO show, could see who is king ding.

The racing is the foundation on which everything else is built. It’s a shame the people steering the ship (MSMA) are more interested in the all mighty dollar than much of anything else. Shame

Some three or four years ago, I suggested exactly the same thing, for the same reasons: that removing technical restrictions would be far more effective at reducing cost than adding more of them. The reason that such proposals are not adopted are exactly the same as the reason why it is almost impossible to place restrictions on electronics: because the factories will leave if such rules were adopted.

The factories fear that having no restrictions could allow someone with a cheap and simple idea to beat them. If someone could find a way to package a 1500cc V6, or a 900cc square four two-stroke, or an 800cc turbo, or a 1600cc diesel, they might have an excellent package with which to beat the factories. The factories would be forced to explore all of those avenues, before picking what they believed to be the best solution.

The factories far prefer to have a tightly constricted set of rules. The only way to gain advantage is by constant evolution within those rules, chipping away at each fraction of a second. That costs lots and lots of money, and prevents small factories from entering the series, and small backyard builders from even starting out. It kills the competition before they have even entered, thereby increasing their own chances of winning. Though the factories say that they are mainly in MotoGP for the R&D, they simply cannot afford to keep losing, the damage to their image is too great. And they certainly cannot justify spending between 50 and 80 million euros a year on their MotoGP projects and keep getting beaten. As Suzuki and Kawasaki can tell you. 

I want to thank David for an excellent article and write-up on this topic, especially since I was the one questioning price controls in an earlier blogpost on the new rules changes. I especially enjoy the comments and responses; very informative.

The assumption that a binding price control on a monopoly supplier by a monopsony buyer will not lead to product shortages (or reduced investment in R&D) imlicitly assumes that the supply curve is perfectly inelastic. That is, that the supplier will supply a given quantity of brakes or forks or whatever to GP racing teams regardless the price (whether it is zero or infinity), since the revenues to the supplier come from product sales to non-race consumers. Thus, they will take whatever price they can get selling to MotoGP race teams, and make up the majority of their revenues from selling to non-race consumers (could prices of brakes and forks to non-MotoGP customers go up to make up the difference?). At least I think that is the argument David is making, if I read him correctly.

And, under the conditions David describes, that may very well be true, I don't know; some kind of negotiated monopoly-monopsony equilibrium at the price cap may be feasible. Ultimately, it is an empirical question that will require testing in real-world application, and that is what we are about to get beginning in 2014.

But, the other side of the market, the demand side, is still a problem, at least in my view. I think the analysis offered also assumes, perhaps incorrectly, that the demand for brakes and forks by racing teams is also perfectly inelastic. That is, that team buyers will purchase a constant quantity of brakes and forks each race season at any price (zero or infinity). In other words, the assumption is being made that at the lower price-controlled price, teams will NOT increase the number of brake and fork sets they order or purchase during the racing season. But, what is to stop the teams from economizing less on brakes and forks if the price is artificially lowered by the cap? Will there be quantity limits imposed on race teams by Dorna to address this? The problem with the price controls, then, even if they do not heavily and adversely impact incentives on the supply side, is that teams could end up demanding a lot more brakes and forks at the lower prices, and the monopoly sellers would not increase the quantity supplied to the teams each season due to inelastic supply and a price cap. Thus, you still get a shortage from a binding price ceiling if teams budget to purchase more brakes and forks at lower prices, but then find they cannot obtain them at those lower prices, especially toward the end of the season.

What, if anything, am I overlooking, here?

Thanks indeed for your previous comment. This article is something I had wanted to write, but had not got around to doing it. Your comment was the prompting I needed.

You represent my position almost correctly. I believe that the supply and demand is not perfectly inelastic; I would compare the elasticity of demand to gasoline prices: there is a base level of demand, and a maximum level of demand, and teams operate within that bandwidth based on price. If a set of forks is 100,000 euros, the team will buy 1 set, and try to make it last by extreme maintenance. If a set is 50,000, they will buy 2 sets. If a set of forks is 20,000 euros, then the team will buy 2, or maybe 3 sets. The only reason to buy a 4th set would be if there is a distinct functional advantage (i.e. if the producer makes a better set of forks). So the effect of a price cap on demand is limited. Teams have a set weight allowance for freight which Dorna will carry for them, beyond that, they have to pay for it themselves. Also, they are only assigned a given amount of paddock space for trucks, and extra parts would take up more of a limited space.

The supply is also largely inelastic, within a bandwidth. If the price is zero, then only the larger companies can afford to supply parts, as only they have the funds with which to pay for the R&D, production and maintenance. If the price is infinite, then you will have lots of suppliers and no demand... As long as the component manufacturers are getting a substantial part of their costs covered (say 60% or more) then the decision to supply parts for MotoGP or WSBK comes down to a simple budget calculation: how many sets of forks are they prepared to supply at the set price. Price caps are likely to see suspension manufacturers move budget away from supplying the support classes (where they currently command much lower prices anyway, because of the lower budgets available to Moto3 and Moto2 teams) and towards the premier class, or perhaps MotoGP, WSBK, and Moto2, leaving room for new entrants in Moto3 and WSS, where the barrier to entry is lower, and technology levels are lower.

Are the cost of forks and brakes *really* the problem in MotoGP? Did Andrea's Brembos really make a difference to Cal when he finally got them?

Surely the problem in MotoGP is the vertical integration of teams and the principal manufacturers of the equipment? Isn't the problem the lack of an open market for the bits that matter?

How do you put proprietary technology into an open marketplace? If the technology is protected by patents or the production techniques are unknown, the marketplace is closed by design. Regulations actually enforce a temporary monopoly for certain technologies to protect the innovator and the risk of investment. Normally, monopoly pricing power is mitigated by substitute technologies and the natural profit-seeking of customers and utility-seeking of end-users.

The problem is that the top MotoGP teams do not seek direct-profits from racing, which basically throws the market concept out of the window. The utility function is also unconventional. Sport is one of the few industries where millionaires can be utterly miserable. Their existence hinges on winning, not necessarily quality of life or material advancement. Stoner was the last rider who put quality of life before winning or material advancement. People questioned his motivation!

Racing is a weird world. If conventional solutions, like open marketplaces worked, I doubt racing would experience so much volatility.

The elasticity of supply probably is zero b/c a monopoly-monopsony negotiation is basically a bid. One party agrees to pay a set price (cost cap), the other party agrees to supply. In this case, it sounds like retention of carbon brakes is the consideration that makes the deal binding.

Furthermore, I think local elasticity of demand is also very low. MotoGP must retain a certain number of teams, who are obliged to compete in all sessions of all rounds in the championship. MotoGP has a well-defined exogenous consumption function. Additionally, if we are looking at elasticity of demand, we have to look at the marginal utility to the competitors. The competitors have steeply diminishing margin utility at quantities greater than what they currently buy, which means demand is also governed by satiation. This is the narrow 'bandwidth' David is referring to in his post.

I think the price controls are economically sound under the present circumstances, but if the competitive environment changes, the arrangement could be rendered worthless.

"There may be a better approach to safety, allowing materials to be used if documentation can be presented showing failure rates below a specific threshold, with restrictions based on elasticity, brittleness and shear strength, among other factors."

David, c'mon: if aluminium is safe for steering stems, why is it not safe for front axles? If ceramic composite brakes can get TÜV approval for cars, how can it be unsafe for GP race bikes with their rigorous inspection schedules? I've been machining up 6Al5V titanium exhaust spigots on my little Chinese lathe tonight, a material that is good enough for military aircraft bulkheads and cheap enough for me to buy off ebay.

You got the real reason a few posts further on: the factories don't want rules that give outsiders a fair chance.

everyone is right. Motorcycle racing started out as a simple, cheap, motorsport for people without money. That was self-limiting in many ways and created exciting racing in others. Now, we have large industrial and intellectual capital invested in developing ultra-sophisticated marketing and machines, and athletes totally focussed on doing whatever it takes to win/get rich. This provides jobs/careers for a lot of people.
Simple rules will allow a sophisticated wealthy business (possibly a bloke in a shed but unlikely x 10-6) to create a ‘weapon’ and employ a rider to suit. This will involve multiple technical/commercial alliances to harness the various technologies/techniques/skills required. The bloke in the garage (or the CEO of a less than top 4 team) stands (virtually) no chance and we watch a whitewash every race weekend/season.
The only way to beat them is to join them. Dorna need a clean sheet of paper and some of the best designers, engineers, mechanics, and specialists plus media/marketing advisors and reps from all teams or at least types of teams (e.g. those with big budgets and those trying to get one). They can either employ them or require the teams to second them for a period (a bit like claiming rules). They should be charged with developing a set of standard rules that provide safety but permit innovation – the best being (perhaps) not an electric bike, but one that uses existing technology and a clean, non-polluting, liquid fuel that can easily be ‘grown’ at industrial scale. Otherwise rules should be simple constraints to avoid ‘mad’ ideas that have no commercial value/likely outlet or would devalue the ‘show’.
Teams must be allowed to use special equipment specifications (e.g. tyres) to overcome technical shortcomings/rider’s needs (Elias is a great loss, mainly due to tyres it seems, to my mind) but any advantage at the last race that is not attributable to a riders exceptional performance (only once a season allowed) will be cut by, say, 50% by a technical committee allocated handicap (weight; use of ‘standard spec’ kit; power limit; electronics etc.). The team might be given 3 or 4 choices and allowed to adopt their choice provided that it is not cancelled/weakened by other changes.
This would make it worthwhile developing technology but only to a point. Once it becomes dominant you are forced to look for something else and the playing field is levelled without everyone having to spend to catch up. Lap times will be constrained, thereby helping rider safety. The ‘spectacle’ should be maintained as run-away seasons will be stalled. Closer racing means more fighting for places, and riders skills to overcome the handicaps will be brought to the fore. The technical committee (with open access to all data) will be able to identify the nature of the advantage and determine the ‘fix (es)’.
Any radical or new technology will need outline approval of the Technical Director (as with F1 I believe)before being allowed to practice/race.
Unlimited testing will be allowed for any team not in the top 5 (Honda can use a satellite of course, but advantages get pegged-back, whilst the satellite team/riders can use the practice/revenue).
The nerds will be happy because they will know all this. The man looking for entertaining TV/a day out will be happy because it’s all so ‘close’.
Honda shouldn’t complain (except the cost) because they can innovate as much as they like. Once it’s proven they will have to try again though…. Perhaps corner by corner programming will give the rider the performance boost he needs to pass easily at some point but then makes it harder to pull away. If another team chose a different corner… If the team/rider elects less control but more ability to ride/brake later/sideways perhaps he can make the difference – as we have seen the problem with perfect lines/control is that you cannot go off them – unless…
It’s not simple and it’s not especially cheap but perhaps it retains the ‘prototype’ principle and allows innovation whilst giving the ‘entertainment’ that most wish to see. I’m no expert, so will leave the difficult detail to them.