New Concorde Agreement allows for more than 20 races

26/05/2012

It is something which has been rumoured for some time and has finally been confirmed: F1's calendar is on track to expand. In his article in today's Guardian, Pitpass' business editor Christian Sylt reveals that the news slipped out during a recent meeting with Bernie Ecclestone. He admitted that from 2013 it will be possible for there to be more than 20 races - a limit which has been reached this year.

Clause 10.5 of the current Concorde Agreement, the contract which commits the teams to race in F1, states that they need to give their consent if "the number of Events that take place in any Season exceeds seventeen (17) (with a maximum of twenty (20) Events)." It is a crucial point since F1's biggest single revenue source is the fees from race promoters. This comprised £325m ($510m) of F1's £970m ($1.5bn) revenue last year and the greater the number of races, the higher the turnover from trackside advertising and corporate hospitality as well as hosting fees.

The biggest payers are the Grands Prix in emerging nations such as Abu Dhabi, Malaysia and Singapore since the governments in those countries use the races to drive tourism through promotion to F1's 515m viewers. They fund the fees of the races in their countries and this has boosted them to £17.2m ($27m) each. It explains why longhaul races comprise nearly 70% of F1's revenue from race fees with the European races providing just 30%. No wonder they are a dying breed.

Ecclestone reveals that "in the next Concorde we have got flexibility to go beyond 20 races. We have got four or five places waiting to do something."

He adds that over the next few years F1 is likely to increase its calendar to 22 or 23 races and they may be in the United States which will get its first race for five years in November. Having multiple races on one continent enables them to take place on back-to-back weekends which reduces travel time for teams. This is important because under the new Concorde Agreement consent from the majority of the top three teams from the past four seasons is required if the number of races is increased above 20, or if over 60% are outside Europe or North America.

The promoters of longhaul races typically have to pay their fee several months in advance which helps F1's cashflow and all race contracts are believed to contain escalator clauses which increase the hosting fee by up to 10%. It insulates F1 from cyclical factors and makes it highly profitable. Since 2003 F1's revenues have grown 10% every year on average and Sylt reveals just how low its capital expenditure is.

F1 is understood to invest under $10m annually and, outside the team prize money payment, which came to £438m ($686m) last year, total costs were around £223m ($350m). F1 only employs just over 300 staff with their total pay coming to approximately £32m ($50m). It makes F1 incredibly profitable and explains why three funds recently paid £1bn for a 21.3% stake in it and also why the sport's majority owner CVC is planning to float it on the Singapore stock exchange. As more races are added to the calendar its value is sure to accelerate.