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Be afraid F1 fans... be very afraid

NEWS STORY
23/03/2019

Other than needing to keep the teams sweet - F1's package of proposals for the sport post-2020 due to be presented to them in the coming days - there is the little matter of the circuits on which the teams are due to race.

Other than the technical rules post-2020, F1 is seeking to get the teams to agree to a budget cap, the scrapping of historic bonuses and the redistribution of the prize pot.

Good luck with that, as they say.

But there is also the little matter of the circuits.

Earlier this year, 16 of them, in the form of the Formula One Promoters Association (FOPA), aired their grievances in the form of a brief statement, and while it has gone fairly quiet since then, it should not be forgotten that five events are in the final year of their current contracts.

The failure to retain those five races - four of which were signatories to the FOPA statement - would not only see the calendar compromised but would cost the sport around 100m, surely the last thing it needs following two years in which it has reported a loss, 51.5m ($68m) in 2018, up from a 28m ($37m) loss in 2017.

Speaking at the Deutsche Bank Media, Internet & Telecom Conference, Liberty's chief executive Greg Maffei, made no secret of who he blamed for the fact that race hosting fees are now so high they have left the organisers "drained". Step forward Bernie Ecclestone.

"Bernie had done a very good job, arguably too good a job, and had drained the promoters," said Maffei.

However, just two years earlier, Chase Carey told the Financial Times that "nobody was tricked... It's not that the deal is overpriced, it's more, did we deliver where we should deliver?"

So, on the one hand we have a senior Liberty boss insisting that the hosting fees are not overpriced even though Ecclestone did "too good a job" by asking so much of the organisers that it "drained" them, while the current F1 supremo says this didn't apply to race fees.

However, in a seeming further twist of the knife, Maffei claims that: "Bernie suggested to a lot of them that they were over-paying and that didn't help the cause", a comment which suggests the former F1 boss acting out of spite.

Fact is however, in late 2016, before Liberty made its bid for the sport, Ecclestone told the Daily Mail that the solution to declining crowds was to "give the teams less money and charge the promoters less so tickets are less. Then we'd get back people queuing up for a ticket."

While it remains to be seen whether F1 can convince the teams to agree to a package that in many ways will be a life-saver to some and a major game-changer to others, the race promoters will also need some convincing.

Last August, Angelo Sticchi Damiani, president of the Automobile Club d'Italia (ACI), said that the 2017 Italian Grand Prix made "a strong loss, and the 2018 budget will not be different either. It is clear that such a situation is not sustainable in the long term. The ACI is ready to do its part, but not under any conditions".

And of course we are all familiar with the British Racing Drivers' Club's (BRDC) Damascene moment in early 2017, when chairman, John Grant admitted that "it is not financially viable for us to deliver the British Grand Prix under the terms of our current contract.

"By running the British Grand Prix we sustained net losses of 2.8m ($3.7m) in 2015 and 4.8m ($6.4m )in 2016," revealed, "that's 7.6m ($10.1m) over two years. We expect to lose a similar amount this year. To continue on this path is not only unsustainable, it would put at risk Silverstone, the home of British motor racing."

As a result, that summer the BRDC exercised a clause in its contract that means that, as it stands, this year's race is the last.

Hosting fees make up the largest single source of the sport's revenue, which last year was 1.36bn ($1.8bn), the 21 races paying an average of 22.2m ($29.4m), bringing in a total of 466.6 ($616.7m).

Remember, for their bucks, unlike most other sports, the race organizers don't usually receive any of the income from broadcasting, official on-site corporate hospitality or even advertising at the venue, all of which heads straight to the F1 coffers.

Yes, it was Ecclestone who agreed these deals, including the staggering built-in annual increments of up to 5%, but surely this was one of the things that made the sport so appealing to Liberty Media in the first place.

It was Ecclestone also who sold the F1 dream to governments keen to see their countries promoted positively, benefiting from the sport's 490 million TV viewers, and therefore willing to pay the sort of fees which, according to Forbes, rose by 49.2% over the 15 years to 2018 while, in the same period, the number of events in traditional European locations fell by 12.7%.

Despite the promise of a revenue sharing deal, which particularly irked the signatories of the FOPA statement, F1 has been unable to get Miami on board, indeed, Vietnam - a location Ecclestone rejected - is now on board... at a reported cost of 30.2m ($40m) a year.

Despite the fact that the sport could lose as many as five races, a number of which are held at iconic venues like Silverstone and Monza, Maffei doesn't appear overly concerned, indeed, like Baldrick, the American appears to have a cunning plan.

"There are things we have looked at to add on to the business that we think are synergistic," he says. "There are a couple (of acquisitions) that could be interesting that are motorsport related and there may be other things that fit well that are extensions to the brand."

Be afraid F1 fans... be very afraid.

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READERS COMMENTS

 

1. Posted by Paul C, 08/04/2019 20:39

"Run F1 and the whole FIA open wheel menage at Sebring in Florida. "

Rating: Neutral (0)     Rate comment: Positive | NegativeReport this comment

2. Posted by Spindoctor, 28/03/2019 13:10

"Bernie's "final" deal was to extract maximum dollars out of a bunch of naive American 'Tourists'. Selling them F1 is right up there with selling London Bridge, Buckingham palace etc. to their Hawaiian-shirted forebears.

"

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3. Posted by bfairey, 27/03/2019 3:09

"I now have a better idea why not promote F2 to F1?
Its cheaper closer racing and you will get more teams."

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4. Posted by English Tony, 25/03/2019 12:54

""synergistic"

That's right up there with "exterminate" as a reason to hide behind the sofa

"

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5. Posted by imejl99, 25/03/2019 11:50

"Cunning plan indeed.
"

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6. Posted by bfairey, 25/03/2019 4:54

"These teams will be gone in a couple or three years.
Williams, money and tech.
Mercedes to FE
Mclaren, more interested in road cars.
Redbull has other irons in the fire."

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7. Posted by sagosac, 24/03/2019 17:34

"I have never understood why this global (and still AAA) sport does not generate its biggest portion of revenues via broadcast"

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8. Posted by mickl, 24/03/2019 16:26

"I think F1 has to come to terms that the current business model for the sport isn't going to be sustainable over the medium term never mind the long term.

It may be revenue for FOM will drop drastically due to losing venues, so what money goes to the teams is seriously going to reduce. Downsizing might be the only option for teams if they want to survive whether they like it or not. The big teams will try to stamp and shout for the same money and disregard the survival of the sport for their own interests and staff.

I suspect what will happen is Carey will just dish out more to Ferrari so that the Italians will end up playing with themselves."

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9. Posted by alfsboy, 24/03/2019 9:29

"I suspect Bernie is in the wings waiting for a cheap bargain .Or Lawrence Stroll."

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10. Posted by GarH, 23/03/2019 17:02

"Poor Greg, he hasn't got a clue. Miami should have taught him that you can't pull a race out of thin air, certainly not in a democratic country. If F1 loses 5 races at the end of this season, how are LM going to extend the championship to the promised 25 GPs? Has Maffei got 9 or 10 'destination cities' queued up? How long will F1 survive on a diet of street races?

When Bernie said "give the teams less money and charge the promoters less so tickets are less. Then we'd get back people queuing up for a ticket." - there was no mention of him or CVC taking less money. 'Course not, that would be silly.

Put your hand up LM, you've been sold a pup."

Rating: Positive (2)     Rate comment: Positive | NegativeReport this comment

11. Posted by Uffen, 23/03/2019 16:16

"I never understood the "promote the country" aspect of the appeal of hosting an F1 race. For one thing the race is in a particular place, which may, or may not, accurately reflect the country as a whole. Then there's the fact that what one sees on TV is extremely limited. What did I learn about Malaysia? It is hot, humid and has torrential rain daily. That doesn't make me want to visit there. Abu Dhabi? It's hot, it is in a desert, people are wealthy. I already knew that. Would I ever visit Sao Paulo? Not from what I've seen and heard during an F1 race. Same thing for so many other races. Some races are OK, like Monaco - what you see is what you get.

Now, I know there is more to these countries than what F1 shows. That is my point. Hosting F1 is a way to showcase your city or country.

The article mentions that no one was fooled. Yes, they were all adults and knew what they were getting into. That applies to circuits, team owners, and governments. "

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12. Posted by Oldbuzzard, 23/03/2019 15:22

"One thing I learned from working at a major consumer product corporation for nearly 20 years is when you turn to brand extensions to bolster the core brand sales, you are admitting, silently, that the core brand is in deep trouble."

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13. Posted by Endre, 23/03/2019 15:03

"The current form of Formula-1 is in agony for years now and it is time to let it die. I am a fan since the early 80's but last few years I have started to just watch recordings only and skipping through most races and this year I had enough, I cancelled my subscription to the TV channels that broadcast F1 here; I could not stand watching this garbage F1 turned into thanks to the "brilliance" of Bernie. Doesn't matter who the owner is now, this sport was irreparably damaged by Bernie.

I don't understand why some of the traditional race tracks don't form an association and start a single open seat racing formula of their own. If the Indianapolis race track could do this, why couldn't a Silverstone, Monza, Spa, Hockenheim, etc. association do the same? Let the current F1 go to China, Vietnam and other "traditional" places; we can do without it"

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