Be afraid F1 fans... be very afraid

23/03/2019
NEWS STORY

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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Published: 23/03/2019
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