Why is Bahrain back on the calendar... follow the money

04/06/2011
NEWS STORY

The decision to keep Bahrain on F1's calendar is one of the most controversial moves ever made in the sport. As always in F1, the reasons for decisions can be found by following the money. According to Pitpass' business editor Chris Sylt, the decision may not have been driven by the money which would be lost if Bahrain had been cancelled but by the money which would have had to be paid out.

Many media outlets have suggested that the last thing F1 Group boss Bernie Ecclestone would want is for the Bahrain Grand Prix to be cancelled because then the business would not receive the hosting fee and trackside advertising revenue from the race. They come to a total of around 30m according to F1's trade guide Formula Money so it is not small beer.

However, whilst it may be fair to say that Ecclestone counts almost every penny made by the F1 Group, 30m is just 3.1% of its annual revenue so it certainly wouldn't do the company great damage to lose it. According to Formula Money's data the F1 Group made an 83.5m profit on the 19 races last year. If Bahrain ultimately doesn't take place this year there will once again be 19 races so there is no reason why the F1 Group shouldn't make just as much money as in 2010.

However, no businessman, particularly one as successful as Ecclestone, likes paying for something unnecessarily. This is often a worse case scenario than not making as much money as had been hoped. And this seems to be why Bahrain has been kept on the calendar.

If a race organiser cancels his event then he is in breach of his contract with the F1 Group and has to pay a severance fee. This is perfectly understandable since the F1 Group would have to make huge changes to adjust the calendar. Likewise, if a race is ready to go ahead but the F1 Group cancels it anyway it makes sense that a severance fee should be paid to the organiser to cover his outlay on promotion and arranging the event. Earlier this week Zayed Rashid al-Zayani (right), chairman of the Bahrain International Circuit, said that Bahrain is "happy to have the race anytime, really" so if it had been cancelled then the F1 Group may have had to pay a severance fee.

If it turns out that by the race's new date of October 30th Bahrain is not in a position to host its Grand Prix, due to the likely renewed protests and violence, then the organisers would have to inform the F1 Group that it could not go ahead. This is precisely what happened in February when Bahraini Crown Prince Salman bin Hamad Al Khalifa suspended the race three days after five people were killed as police broke up demonstrations by activists.

The big difference is that if the race cannot go ahead in October then there will be no time to reschedule it. Accordingly, it would have to be cancelled and instead of the F1 Group paying a severance fee it would instead receive the payment. Ecclestone may not accept the money as a goodwill gesture to Bahrain but it would certainly be nice to have it in the bag if needed and far better than the F1 Group having to pay it out.

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Published: 04/06/2011
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