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Bahrain government paid £25m fee for cancelled race

NEWS STORY
19/09/2011

Formula One may be one race down from its expected tally this year, due to the cancelled Bahrain Grand Prix, but that doesn't mean to say its revenue will be reversing. According to an article in the Independent, Pitpass' business editor Christian Sylt, the government of Bahrain paid the estimated £25m fee to host its race this year even though it didn't take place. It means that not only will the sport's revenues remain roughly stable on 2010 but its profit may get a boost since F1 didn't have to spend any money to get the fee from Bahrain.

The top ten F1 teams get 50% of all profits from the sport so this news should come as a pleasant surprise for them. It doesn't mean to say they are quids in though, since, as Pitpass reported just after the race was cancelled, they had to forego an estimated £25m in sponsor payments due to the loss of exposure in Bahrain.

It was widely reported earlier in the year that Bahrain would not need to pay its fee if the race did not take place and in February F1's boss Bernie Ecclestone confirmed to the Telegraph that he was "not charging them for a race they are not getting." However, it seems they paid the fee anyway as Ecclestone told Sylt that "we were paid for Bahrain. I said we will give them the money back and they said don't bother." No wonder that he adds "they are lovely people."

On a more serious note, it does show just how committed the Bahrainis are to retaining F1 and how much value they place in the sport.

Earlier in the year Ecclestone predicted a fall in F1's revenue due to the cancelled race but he now says "I don't think turnover will be down this year. I think it will be flat." He adds "I think the profit will be more or less the same as 2010."

Last year F1's Jersey-based parent company Delta Topco, which is majority-owned by private equity firm CVC, made an estimated £335m net profit on turnover of £1bn. Its three biggest sources of revenue are race hosting charges, television rights sales and trackside advertising fees. Ecclestone says "we moved Bahrain's trackside advertising to other places."

Next year's Bahrain Grand Prix is scheduled for 22 April and Ecclestone says he hopes it will not need to be cancelled again. "I spoke to the Bahrainis yesterday and they said everything is going to be fine. I hope they are right for their sake, not ours."

A race in America is due to return to F1's calendar next year for the first time since 2007 and a Russian Grand Prix will be added in 2014. Ecclestone reveals that "after Russia I would like to go to South Africa and Mexico. Both countries are trying to do something." A delegation from the Mexican beach resort of Cancun visited Ecclestone last month and he adds that, despite its economic problems, "Greece is also trying to do a Formula One race."

Ecclestone visited Greece on a rare holiday last month which culminated in a trip to Croatia. However, he says he did not meet anyone connected to the Greek bid on his trip. The project is run by a company called Dielpis and it is the brainchild of architect Athanasios Papatheodorou. His aim is to host a street race in the Keratsini-Drapetsona municipality near to Athens but, as ever, the obstacle is funding. In addition to requiring public and private support for the race, the Greek government will have to invest in the local area. It is hard to imagine this happening given the well-documented economic problems in Greece at the moment. With his tongue firmly in his cheek, Ecclestone says "the Germans will lend them some money."

Not all markets are so keen on F1. In 2007 Delta Topco bought Istanbul Park Organizasyon AS, the company which promotes the Turkish Grand Prix, in the hope that local interest in the sport would accelerate. However, it never took off and the race has been dropped from next year's calendar.

It was plagued with poor attendance blamed on high ticket costs which rose to £236 for a grandstand seat. Ecclestone says there was no point in reducing ticket costs as although spectator numbers may have increased, there is no guarantee revenues would rise.

"We didn't need to reduce the ticket price," he says. "Better that we don't have the race. We can race at other places. We bought it because, like lots of things, it seemed a good idea at the time. If, as we expected, there had been 100,000 spectators it would have been good but it didn't quite work out that way."

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