Failure to renew races would cost F1 100m

04/03/2019
NEWS STORY

If the clock is ticking in terms of the June deadline by which time the various regulations for the sport in 2021 need to be agreed, alarm bells must surely be ringing already regarding the future of the British Grand Prix at Silverstone.

As it stands, the July 14 race at Silverstone is the last, with the circuit's owners, the British Racing Drivers' Club (BRDC) and Formula One Management (FOM) yet to come to an agreement.

However, Silverstone isn't the only circuit whose contract ends this year, for the races in Germany, Italy, Mexico and Spain are now in their final year.

Last week it was revealed that the sport lost 51.5m ($68m) in 2018, up from a 28m ($37m) loss in 2017 and a 35.6m ($47m) profit in 2016, and as Forbes reports, should these five races be lost from the calendar it would lose 98.8m ($130.9) in annual race fees.

The signs in Mexico are worrying, for the government will no longer provide funding for the race, and will instead divert the money to the construction of a controversial new railway.

With Silverstone having ended its contract having finally noticed the 'elephant in the room' in terms of the unsustainable ever increasing hosting fees, the president of the Automobile Club d'Italia, Angelo Sticchi Damiani, has expressed similar views, admitting that the Italian Grand Prix is "not sustainable in the long term", likewise the deputy mayor of Barcelona, who has said that "Formula One is not a priority".

Between a rock and a hard place, F1 is hardly in a position to offer special deals to the five promoters, for with an eye on those increasing losses, the powers-that-be are only too aware that offering a 'nice price' to one means similar deals will be demanded by the various other promoters.

Indeed, the majority of the current promoters have already expressed their unhappiness, the Formula One Promoters Association issuing a statement in January in which sixteen of the current twenty-one promoters raised a number of issues.

Along with feeling that it is not in the long term interest of the sport that fans lose free access to content and broadcasting, the promoters claimed a lack of clarity on new initiatives and a lack of engagement with promoters on their implementation.

However, one of the issues that most alarmed the sixteen signatories to the statement, was the fact that while they pay hosting fees which rise every year, and don't generally receive a slice of the income from broadcasting, official on-site corporate hospitality or advertising at their venues, the proposed race in Miami was to be run on a revenue sharing deal with the promoter not having to pay any hosting fees.

The promoters of the Russian and Mexican races were quick to distance themselves from the FOPA statement, while the Azerbaijan promoter insisted it had been misconstrued.

Of course, the attitude in Mexico will have change somewhat since the government pulled the plug, leaving Sergio Perez lamenting that this could mean the end of F1 in the country.

"We have contracts where 2019 is the last year and we have to either create a new agreement or go our separate ways," Chase Carey told investors in a conference call last week.

"There's nothing really unique to this that wasn't true last year," he added, omitting to mention the FOPA statement or the revenue sharing deal in Miami.

"We had a number of renewals last year, just as we had a number of renewals the year before," he insisted. "There are different issues to each one. That's the process we're engaged in now, with renewals for 2020, we'll always have three or four negotiations we'll have to go through.

"As we've gotten a few years under our belt I think we feel pretty good about the trajectory of the ability to continue to have a healthy business," he said. "We think there's room to add a bit to the race calendar. We have places all around the world that would like to add races, including not just new markets, but some traditional markets like western Europe."

Indeed, F1's governance contract allows for a schedule of up to 25 races each year, however, Ferrari, McLaren and Red Bull Racing jointly hold a special veto as they were the top three teams over the four seasons to 2012 when their contracts were being negotiated, and F1 company documents reveal that consent from the majority of these three teams is required "if there are more than 20 Events in a season".

While more races means more income, with the average annual hosting fee working out at around 22.9m ($30.4m), however it also means teams having to spend more on travel and racing, not to mention the added stress.

However, while Carey is confident that the sport can secure more races, back in 2017 commercial boss Sean Bratches was telling Autosport that "in the seven months I've been in this job I've probably had about 40 countries, cities, municipalities, principalities approach me about interest in hosting an F1 race".

Despite being approached by "40 countries, cities, municipalities and principalities", the fact is that to date only one new race has been signed, Vietnam, an event that even Bernie Ecclestone turned down.

Despite the generous revenue sharing offer Miami is looking increasingly unlikely, while the Danish finance minister gave a proposed street race in Copenhagen the red flag.

The good news for Chase and co however, is that should these five races fall from the calendar, the resultant 100m loss won't appear on the books until 2021.

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Published: 04/03/2019
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