Has the fee to host an F1 race dropped to 5.8 million? No chance!


The companies which run Formula One released their 2010 accounts yesterday and some of the big figures were immediately picked up by reporters who may not have thought of the implications of what they were writing. Indeed, if they had the benefit of hindsight they may well have thought twice.

The biggest sore thumb comes in a report by Bloomberg's Alex Duff which almost verbatim copies a statement from the accounts of F1's rights holder Formula One Administration (FOA) saying that the company increased its revenue "by 2 percent to $1.08 billion by adding races in South Korea and Canada." Other reporters then jumped on the bandwagon with the Telegraph's Tom Cary writing that "last year's two per cent increase in turnover was attributed to the addition of the Korean Grand Prix and the return of the Canadian Grand Prix to the calendar."

The meaning of their statements is very clear: the two new races led to a 2% increase in the money received by FOA last year. But has anyone stopped to think of the implications of this?

The money FOA receives from the race organisers comes in the form of hosting fees and these are believed to bring in around half of its revenue. Cary himself has reported that Bahrain pays 24.5 million ($40 million) annually so how much are Canada and South Korea paying then?

Well, the New York Times reckons that Canada alone is paying 9.2 million ($15 million). However, if the Bloomberg and Telegraph reports are to be taken at face value, Canada and South Korea gave the 2% increase in FOA's revenue. So just how much of an increase was the 2%?

Let's hand over to Cary who claims: "The overall figure of $1.08billion (660million), revealed in the latest accounts to be filed at Company House, represents an increase of $19million on 2009."

So the answer is a grand total of 11.6 million ($19 million) and this would mean that either Canada or South Korea is paying 5.8 million at most to host its race. To put this in perspective, this is about the same amount as Santander is paying just to sponsor the British GP. So, in a nutshell, there is no way whatsoever that race hosting fees have dipped as low as 5.8 million.

Then let's not forget that F1's boss Bernie Ecclestone himself has admitted that all races are subject to an annual 10% escalator in the fee that they pay. So, how on earth could the race hosting fees have increased by 10% in addition to the two new races joining the calendar when the total money coming in to FOA only increased by 11.6 million? Well you won't find the answer to that in Cary or Duff's articles but rest assured that Pitpass' business editor Chris Sylt will be providing our readers with a full explanation in due course.

What we can safely conclude now is that it is simply impossible for the race hosting fees to have increased by 10%, and for Canada and South Korea to be paying the going rate, if FOA's revenue only increased by 11.6 million.

Clearly it should have been much, much higher but it seems that didn't occur to Cary as his article proclaims that "Formula One has seemingly defied the economic downturn after announcing turnover once again in excess of $1billion for 2010."

It's a wonderful thing is hindsight.

Article from Pitpass (http://www.pitpass.com):

Published: 06/04/2011
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