Formula One has an unusual business model, far removed from those of other sports. It works for the company but it produces problems for other stakeholders in the business. Those with the biggest headache are the circuits. They have to pay annual fees for a Formula 1 race which can cost as much as $40 million. This provides FOM with much of its revenue, but means that the circuits cannot hope to cover the costs of events by selling tickets. There are few venues which can accommodate more than 100,000 and so it does not take a rocket scientist to work out that each spectator must pay $400 if the event is to meet the costs of the fees, not including all the other costs that must be met to stage an event.
Thus race promoters have had to rely heavily on local government help in order to make events cost-effective. This is not a bad idea given the benefits that a Formula 1 race brings to a region but there are always going to be those who will argue that taxpayers should not be investing in races, largely because they either do not understand the benefits that a race brings – or choose to ignore them for political reasons. The fact is that a F1 race generates revenues of many different kinds for a region, in addition to attracting more visitors and more business. Cities spend far more to pay for an Olympic Games or a World Cup. London is reckoned to be spending as much as $15 billion on the 2012 Games. These will put the city in the global spotlight for a fortnight and will leave behind some facilities. It is hoped that the event will also help to regenerate the east of London. By comparison to this a seven-year deal for Formula 1 is a real bargain, with annual global exposure at each event and a bill at the end of it of around $500 million.
F1 also creates rather better regeneration possibilities as the event is spread over a longer period. Bernie Ecclestone comes in for a lot of criticism for charging cities too much, but one can argue that it is the cities rather than Ecclestone that set the ticket prices and that things would be a great deal better if they lowered prices and increased spectator numbers. The problem is that venues can rarely afford to invest in new facilities because all their available money is being spent on the fees. A different structure might be a better idea in this respect.
In the United States of America NASCAR has a very different approach. It negotiates commercial deals for the sport and then gives 65 percent of the revenues to the tracks. It gives a further 25 percent to the teams and drivers and keeps 10 percent for itself. Tracks also keep control of additional revenues that come from ticket sales, sponsorships, concessions and merchandise. The teams then earn their prize money from the tracks. Using this method, NASCAR earns less than FOM but there is a strong incentive for the tracks to act in the best interests of the sport, by ensuring successful events, which helps to enhance the value of the NASCAR brand. NASCAR makes additional money by its involvement with in the International Speedway Corporation, which owns around half of the tracks that are used. This means that it avoids questions of monopoly status but still makes a lot from the circuits. The company is privately-owned and much of the profit is ploughed back into the business to improve facilities. The result of all of this is that everyone is happy and they all work together for the future of the sport. The cost of ticket prices remain sensible and the fans pack the grandstands wherever the racing takes place. It is in the interest of the venues to add as many seats as possible to increase capacity and they earn additional revenue from these customers who spend money at concessions and on merchandise. The sport also has a centralised merchandising operation, organisation by a trust.
While NASCAR itself may make less profit each year than FOM, its earnings are increased substantially by its ownership of a number of venues. Fans get a better deal overall and the sport gives off a better impression. Thus the balance between the sport being a business and an entertainment is different to the F1 world, and encourages fan involvement, and the potential earnings that come from that.
Insightful as ever Joe, but important to remember that NASCAR’s France family also own the majority of the tracks, so they take a chunk more of the revenue than you initially suggest
Hi Joe, when will you arrive in Singapore?
Joe, I love your articles, but ISC (NASDAQ: ISCA) is very much a publicly traded company. The France family only has about 35%…
Unless you were talking about NASCAR, at which point I missed the reference
.
piercey,
Indeed it is, but they still own quite a percentage and enjoy the revenues from that.
I have to say Joe, it’s posts like this that keep me coming back day after day…. Very considered.
Interesting thoughts again.
So if FOTA is looking at gaining FOM to make the deal easier, their next step should be to get the tracks more involved, let them keep a bit better share of the pie so they can actually profit from investing and having big crowds, and still keep a better portion of the pot!
Nascar has got it right, it is the highest attended spectator sport in the world, although those figures have dipped slightly in the last couple of years. FOM may make more money but Nascar pretty much only needs one country to fill its coffers which is astounding.
While watching the US stock car coverage there are adverts for true grassroots tracks with the largest stars of the sport urging you to visit your local track regularly. Other ads make direct appeals to women and ethnic minorities to get involved. In contrast F1 just drops a race into a new territory and crosses its fingers that the locals will build a fan-base from nothing. This tactic has at times been a failure, although never for FOM in a financial sense as long as the fees are paid.
If Nascar and Grand Am do choose to sanction a series using the DTM rulebook as is rumoured then Bernie had better watch out – they’ll be peddling racing with global appeal and they are the only body with the nous to take on FOM. The day when Nascar gets a product that the whole world understands is the day when Bernie will have to up his game. Luckily for F1 Nascar doesn’t need the rest of the world to help it make money at the moment, although if they want to grow they really can’t get much bigger in their homeland so a DTM-style series would be the perfect way to export their way of doing business.
Nascar doesn’t have the same shareholder pressures as those currently exerted on FOM and nor does it boast the international reach of the Grand Prix circus so it can’t lobby for government money, but there can be no question that massive lessons in how to exploit (dirty word, I know) the sport and help it to sustain growth can be learned by Bernie and co. Somebody should hand Mr E a dictionary and tell him to look up the meaning of promoter…
…or the circuits need to set up their ticket sales like a concert, where the first few rows of the concert comprise 50% of the profits, and then the remaining 200 rows comprise the other 50% of the profits.
Have some ultra-VIP tickets for 15,000 euros a piece, sell a few hundred of those, and you’ve got a good chunk of the cost covered… then cheap tickets around the rest of the track… bam!
Put the world’s problems in a blog post, and you’ll find all the answers in the comments section.
Interesting, but the point you made about NASCAR filling seats isn’t that true per say.
A simple google search of NASCAR empty stands and the first 3 sites are about Bristol where empty seats where (http://bleacherreport.com/articles/366779-nascar-empty-seat-syndrome-even-at-bristol) Indy !!! (http://bleacherreport.com/articles/425827-half-empty-stands-at-indianapolis-shows-nascars-not-in-good-shape), and Bristol again.
While I’m not going to an GP any time in the foreseeable future because mostly of the price, I think part of it also has to do with where the races are.
Australia, whether it be Adelaide or Melbourne packs grand stands. Silverstone packs stands. Nurburgring packs stands. Spain with Alonso fills stands. Suzuka packs stnads.
China does not. Turkey does not. etc…
While your theory may and I think does hold some truth, the mere fact that half our GP’s are in the middle of nowhere with little interest from the community means your comparing apples with organges, and our organges are squashed
APAS,
The seats are normally full.
Joe,
Olympics/Football worldcup vs F1
*****************************************
One of the big mistakes you make IMHO is comparing those huge events with a F1 race. You’re not comparing eggs with eggs here. You live in France, I lived there and French I spoke to told me that the 98 WorldCup was the biggest thing they’ve ever lived since the end of German occupation.
Here we speak of events which have economic advantages but which also have psychological ones as well. When such events occur, the whole country tempo is dictated by those events. It marks a nation memory like few other events can.
Circuits
*********
Once I wrote here that circuits should create a union which protects them and allow them to survive easier. If most historic circuits do it, the FOM would have to negotiate with them for sure. You answered that it’s very complicated… Complicated but not impossible.
Governments should help as you said but there’s a limit to how much help they can bring particularly with the actual economic situation of most countries bar those sitting on oil fields.
More importantly, it doesn’t make sense for F1 to earn so much money and gives so little back to the fans, etc…. Recent events with the BBC/SKY solution show that teams as well care only about their income. Whitmarsh backtracked from saying that the F1 should be aired for free and Montezomolo recently said that he doesn’t mind F1 on pay-per-view. So FOTA shows clearly that it is there to get more money out of Bernie, nothing more nothing less. The FOTA Forum is an empty shell with nothing inside… It’s like democracy : say whatever you want, stock-market will decide.
The NASCAR stuff is brilliant but it doesn’t work for either Bernie or the Teams so it has 0 chance of being copied by F1.
PS: I’m not communist. I hate communists as much as capitalists (sorry Andy)
I know that in addition to the circuit paying them a fee, FOM also get all advertising and TV revenue for the event hence leaving the fans as the only source of income for the circuit, as you say. You raise the valid argument that local governments should stump up cash as the raise brings people to the area who spend money etc. In this respect, aren’t the local government simply acting as middlemen taking money from people in the area to bring people to the area to buy services which provides money for people in the area?
Have any circuits in the past tried approaching the local businesses who benefit directly (hotels, restaurants, hire car companies, shops etc.), pointing out their financial gain from the event and suggesting they contribute directly? 5,000 businesses paying an average of $4,000 would cover half the fees so the ticket sales would provide excess money for the circuit and prices could be reduced to encourage more fans and even better return for the local businesses.
“…there are always going to be those who will argue that taxpayers should not be investing in races, largely because they either do not understand the benefits that a race brings – or choose to ignore them for political reasons.”
I, for one, have never heard those arguments made in a compelling way. I’ve heard many generalizations and platitudes, but they are based on unproven and unexamined assumptions, and lack hard data. I would have thought that this claim was statistically provable, and that one of the bright lights at FOM would have commissioned a study to do just that to help their case. But they haven’t, and one wonder why.
Moreover, even if it were shown that government investment in F1 races brought economic benefit, then F1 would have to join the queue of causes that can demonstrate such benefits, be they economic or social. If you propose that the government should spend, say, $20 million on subsidizing the race, then the question would have to be asked, is there anything else the government could do with that $20 million that would do greater public good?
These aren’t mere ‘political’ questions. They are questions about accountability, and responsible use of public funds. I’ve been a fan of F1 since the late ’60s, but even I don’t find the case for public funding of the sport very convincing.
One of the problems, if you can call it a problem, is that F1 is global, while things like nascar are not. Cities, regions and countries want that olympic hit every year so many are prepared to pay a premium for F1.
I mentioned in another blog that on average ticket sales are about US$22 million per circuit, which for ‘certain’ circuits is about US$17 million more than their sanctioning fee, but for most it’s about 3/4′s of it.
But economic impact is the real key, and not one event runs at a loss for that calculation, but depending on the local tax in each host country this can be very varied.
On average to double a ‘regions’ investment in their F1 race, all they need is for 0.2% of TV viewers to visit at some point within a 10 year period. OK some places are a little more touristy than others, and maybe that’s why Cape Town, Cancun and Thailand are always just about to host a race.
But a new economic model would be nice, and maybe it’s just around the corner.
Taxpayers in any region of the United States reap so very few benefits from a Formula One race as to be meaningless. In the early days F1 was partially responsible for the rebirth of a tired, old downtown Long Beach, California, but other than creating a modern and privately held racing facility, the yearly bump in gains by tangential industries (hotel, restaurant, entertainment) are simply small and temporary as to have no influence.
It is a business model that works for the tiny, top of the ladder, not the taxpayers.
Interesting topic. Also – on one hand F1 has been at dramatic cost-cutting over the past few years. At the same time it has built a number of new, very expensive tracks, many of which have little attendance.
All to be paid for by goverments and fans to Mr. E and CVC.
How meaningful is this?
Hello, Joe
Where does NASCAR actually get their money from?
SimonK
SimonK,
TV deals, sponsors etc
Alas, surely FOMs main preoccupation is servicing a large loan? I doubt many of the money people would take a longer term view to safeguard circuit owners interests.
On a side note, the last time I checked Olympic tickets were pretty expensive as well, ignoring the fact 75% of all tickets will cost less than £50, cause the event that I wanted to go all cost vastly more then that figure.
I have to say that in recent years Bernies approach to the F1 business has baffled me. Circuits with no crowds, phenomenal race fees, handing races over to Sky for an absolute pittance and constant battles with the teams and FIA on just about everything.
F1 is making money, but in my eyes it could be making a hell of a lot more if it was managed by someone more in touch with the internet age.
Squeeze the teams, the tracks and the fans too much and somethings gonna go pop.
You can’t compare NASCAR to F1. One is pretty much a national competition in a country where circuit owners have always held the whip hand.
Bernie gets away with his tricks because he’s working on a world stage, where some countries are more than happy to run F1 as a loss leader to gain prestige and tourism.
Jonno,
I just did…
All this being true, isn’t the real problem the extent of F1′s debt? NASCAR, by contrast, is not as heavily leveraged and thus (perhaps) has the luxury of taking a different view of its business and stakeholders.
Scott Bloom,
As I understand it, the debt is nearly paid off now.
Great points all Joe, in regard to NASCAR operations. In addition, they only have one continent to deal with in regard to transport which makes it even more economical.
Attendance has been down recently but that is due to the economy as opposed to fading interest.
What i don’t understand is how the truck series or the nationwide series survives, as most of the stands are empty for those races, especially the trucks.
Also, just read today that Bahrain agreed to pay their fees for this years canceled race, some 40 million. Guess that’s why Bernie was so keen on trying to reschedule for this year. I’d wager a hefty sum the Bahraini’s tried for a refund and Bernie stiffed them, and came with this statement to save face.
Certiainly on the right track it seems- greed never an option
Joe,
“… there are always going to be those who will argue that taxpayers should not be investing in races, largely because they either do not understand the benefits that a race brings – or choose to ignore them for political reasons.”
An F1-race brings some benefits, but do they merit tax-payers money being invested? You obviously believe so and seem to think that people who don’t agree either don’t understand or choose to ignore the benefits. Please tell a bit more about those benefits.
Johan,
There are tangible benefits, which include the money that an event brings to the region. Visitors eat, drink, shop and thus there is money in hotels, restaurants, etc. This is usually tens of millions of dollars and there is direct taxation that goes straight back to the authorities, in addition to the jobs that are created and so on.
There are also the intangible benefits, such as year round visitors who see the race on TV and think that it is worth a visit to the city/region. This is difficult to quantify, but clearly exists. There is also business attracted to the region because it is seen as being more exciting. In addition to that there is the improvement of the image of a district, such as Albert Park and St Kilda in Melbourne, which results in the price of houses rising, which also benefits the local economy and creates new businesses as different classes move into the neighbourhood.
Well, as stated, ISC does own or have a significant share of many of the speedways in 20 states where NASCAR races, and the France family which holds a reported 35% of ISC and executive control essentially gets a double dip.
@raceoftwoworlds Nascar is NOT the highest attended spectator sport in the world, it may have on average (especially with the southern and superspeedway locations) they are able to get some of the highest per event attendance. But per weekend or when you average out attendance across the league and especially throughout the season, baseball, football, basketball, and even hockey draw more of an audience. Take a look at Sunday Money for some of the breakdown of the claimed numbers and France family hold on how NASCAR evolved.
I also don’t think there’s a hope in hell of NASCAR really growing beyond it’s peak it had just a few years ago, and have scarcely seen adverts that cater to minorities or even many aimed at women.
I understand the additional/tangible benefits argument for some of the new venues, but do you think this is also true for the more traditional tracks – which, I suppose, are those which tend to have less taxpayer/government support?
If we look at Silverstone in the UK (I’m not in the UK, btw) it would interesting to know how many race-goers are from outside the UK and are, therefore, spending additional amounts over and above their spend actually at the venue (plus, I suppose, the fuel or transport to attend). For example, do any UK-based racegoers at Silverstone actually spend ANY money in the area – other than the ticket, and a burger and beer or two actually at the venue? Obviously that contributes to local employment (albeit very temporarily), but for genuine wider benefits do you know if there have been any studies carried out? I’m not saying there is NOT benefit surrounding a traditional-type race, just that it intuitively seems that there is less potential for it than, say, at Singapore. In the F1 vs Olympics debate, part of most multi-week Olympic coverage that I’ve ever seen includes a type of “local colour/travelogue” items that actively promote the region/city/country as a destination – I haven’t (recently) seen anything like that around an F1 race (on my network, anyway). Whether that makes the CONSIDERABLY higher costs to host the Olympics a good deal is, of course, another question
However, I think your key point is that the circuits should be charged a LOT less for the race fees. This would allow cheaper tickets leading, in many cases, to more fans in attendance which leads to greater potential for merchandise sales, growth in ongoing sales from follow-up marketing, etc. etc. If allied to a MUCH greater use of online activity (streaming, social networks, marketing, etc.) there is huge potential for growth. The current commercial rights holder seems locked in the 1980′s with the concept that money only comes from TV and hosting fees. Hmmm, wonder why THAT could be………
Contented be, nor itch for further store.
They seized the swan – but had its gold no more…..
Bernie and the local race promoters both need to learn from the moral of the above couplet. Bernie’s charging exorbitant fees together with demand of “state of the art” facility for the VVIP sponsors and their guests has resulted in Race promoters trying to recover their cost ASAP by bumping up the ticket sales, result is the sport is not really promoted amongst the masses at the race venue, but to few who can afford and fewer fans traveling to a race venue. While in 80′s and 90′s when F1 was pretty much limited to Europe, due to socio-economical conditions there were lots of fans who used to travel the length and breadth of Europe along with the circus. The youth hostels, Government policies (on unemployment,student benefits) back in 80-90s also boosted the trackside attendance.
Some of the newer circuits tried to buy into the model that you and Bernie sell to them where local governments should bite the bullet pump in the money to build a customized circuit, give ticket subsidies and hope that the tourist monies will offset the expenses and over a period of time make profits. Sepang Malaysia is a good example where the model was tried and lots of tickets are offered (even now) at subsidized rates still around 100-150 MYR, but there isn’t a single year when the circuit isn’t in news in local media for bailout request to the government.
So if indeed Bernie wants to secure the long term future of F1, he/CVC/FOM have to check their greed on the race fees (which keep going up sometimes even before the current contract lapses) and their demands of fancy state of the art facilities.
Agreed the Bahrains and Abu DHabis have enough dispensable monies to throw on futuristic circuits, that doesn’t mean that the Indias and COTAs have to join the match the features party and not to mention the duress the Silverstones and Montreals are continuously put under by Bernie for “facilities”….
The classic circuits started as modest facilities and evolved over the years, the new sites should get that benefit, so the 700-800M dollars spent on front end of the project can be saved and used to make F1 popular among the locals.
Else F1 will have the same story as the goose that laid golden eggs explained in the opening couplet…
Joe, in your response to Johan you suggest how a case for government subsidy of F1 could be made. I don’t doubt that you’re right; an F1 race does stimulate the local economy in the short and the long term.
But there’s still the question of value for money. In my country, Montréal has the GP. Toronto, by comparison, just wound up the 2011 edition of the Toronto International Film Festival (TIFF). Like the GP, TIFF attracts huge audiences, massive international attention, and has huge star power. For a couple of weeks (rather than days) Toronto is on the world’s radar.
Cost of the government subsidy to TIFF: $800,000 – 1/50 the cost of FOM fees.
So, if you’re in government, wouldn’t you look for 50 TIFFs rather than one Grand prix?
Peter Coffman,
All fine and dandy, but they don’t, do they? They pay for racing cars.
With just a fraction of the money from F1 actually flowing to the teams, there’s certainly a lot of leeway in terms of lowering the fees on the venues. (What is it now? 50%) If the teams were smart (and FOTA actually cared about the fans), they would negotiate for something similar in the next Concorde agreement to go with an increased share of revenue. Maybe the teams get 60% of the revenue, reduce the circuit costs by 10%, and promoter’s share is around 25%.
Not going to happen, but it’s a nice fantasy for the race going fan…
Abhijeet,
The problem is that the promoters gets more than 50 percent, while in most sports that percentage is 15 or less.
I was listening to some stock trading tapes a few days ago and one “expert” was talking about how it’s important to know who’s going to get “screwed” in the deal, when you make a deal. To put it simply, when you are in a room with a lot of people and you are making a deal to make money, in some cases, there is a person who is going to get a bad deal/screwed and it’s important to not be that person who gets shortchanged.
Bernie and the teams he represent seem to have perfected this idea of not being the ones to get shortchanged.
Derick,
I disagree. The teams are not happy.
Contrarian, apologies it is indeed highest attendance per event rather than as an entire sport. Although Major League Baseball is the daddy there are literally thousands of games in a season, something many sports couldn’t do even if they wanted to. However impressive they may be, I think Nascar does massage some of the attendance figures – it’s always estimates rather than hard numbers. The adverts I referred to were the Drive for Diversity campaign that may not be running anymore. They ran through many races last year. Although it is symptomatic of a sport that lacks diversity, at least it was an overt attempt to sell the sport outside its traditional demographic. Whether it worked is another matter…
Some great suggestions on how to solve the problems the circuits face on here, although like has been mentioned as long as FOM and the teams are making dough then it won’t change.
Another thing that NASCAR does well is getting exposure to the Nationwide series and the Camping World Truck series. It’s a shame the same can’t be said about GP2 and GP3 when it comes to FOM.
Martin,UK
Dare I posit this question: If you were 80 years and 325 days old, and had a personal mega-cash cow in operation for yourself and your heirs, would you have ANY priorities, cares or considerations outside of maximizing its income short-term to you and your heirs for the few remaining years you had left in this world? Your answer might end the bafflement if it’s not longer than two letters.
Darth Bernie speculates too much leaving venues leveraging the cost with a promise of local development. FOM earns far too much for doing almost nothing besides asking for guaranties of all kinds. You mention a 400€ ticket and that’s what everyone pays for 3 days in pelouse.
I understand FOM has everything studied and leaves no empty spaces when it comes to corner the F1 fan, then when they see educated fans not happy to pay they switch to places like Bahrain where you can see the empty stands.
Bernie acts like Attila, no grass grows after he steps in, and if F1 goes tits up when he heads for the grave, it won’t be his problem.
I hope Fota turns this around.
Joe (and Karen) – one thing you don’t appear to have mentioned (apologies if you have), is the focus on the spectacle. F1 is a bit like going to a rock festival. If you put on a good show, people will pay the ticket prices. However, the F1 show, including support races, in my opinion is sliding backwards. The failure of qualifying using the current tyres makes this worse. F1 needs to invest more in the weekend so that the spectators feel the prices are worth it. This will assist the circuits as more spectators will come. A good example would be to compare the F1 years with and without the V8 Supercar support races at Melbourne.
Don’t understand why the FIA is so impotent in dealing with the parasitic way F1 hoovers up resources and is dumb enough to shoot itself in foot, which also wrecks havoc with the rest of motorsport.
bt52b,
The rights were sold and unless they change hands again the FIA has no real say. I disagree about the rest of motorsport. The FIA is doing a lot of positive stuff at the momnet with rallying, sportscars, GTs and so on.
A new opportunity for Bernie, then: buy up the classic tracks. Start with Spa. Surely he’s considered it.
I believe I may have suggested that at some point in the past.
[...] Source: http://joesaward.wordpress.com/2011/09/19/the-plight-of-the-f1-circuits/ [...]
V8 Supercars in Australia have attempted to emulate the F1 model. They charge each track a fee to turn up and State-level and some country (e.g. New Zealand) governments have paid some of that. There is a much bigger risk for this locally as V8 Supercars don’t have as large a market to reach as F1 – so this means we will be losing a round in Tasmania as the government cannot afford to pay for the racing to be there.
The resulting income the state/country receives from visitors to a V8 race is enough to keep them interested, so the scale of F1 to a country must be enough to pay for the higher sanctioning fees. (Not that the Victorian government understand this)
If sanctioning fees were reduced, ticket prices could go down but that would unlikely significantly change the attendance level in Abu Dhabi or China. It wouldn’t affect Silverstone as it’s at maximum allowed capacity I believe. Australia could go up a little but even then there’s not a huge amount more space to fit the people. At Monza, Ferrari’s fortunes make a bigger difference than ticket price.
While I’d prefer ticket prices to go down, like everything else in F1, it’s down to what people are willing to pay (spectator, track, government etc).
Typical…you type something out and then the facts change.
The Tasmanian government have today signed a 3 year deal for keeping a V8 Supercar race in Tasmania.
Bernie created the model/ series which we have. Personally I don’t consider Nascar to be a challenger to F1 – most of the world could not care less about Nascar, which is true of most USA based sports – eg does anyone watch basket ball/ NFL/ NHL outside of the US?
If the venues dont want to pay for their F1 weekends I don’t understand why they continue to do so. If venues want to change what is going on they need to organise themselves with other interested parties.
The F1 series is one of the most watched sports in the world. The teams spend as much as any team in any sport in the world. The champions are as well known as any in the world.
So should it be somehow “more fair” or should other make more money? Personally I would say perhaps, but bring on someone who can make that happen. Instead of complaining about the status quo, bring some new ideas and energy instead of whining about a pay cheque.
JEZ,
The point is not that NASCAR is or isn’t a challenge to F1. The article is about the business models involved and how NASCAR is less profit-hungry and more fan-friendly. As a fan (presumably) you should appreciate that this would be better for you.
Anthony (@PTaruffi)
Given that theoretical position. I personally, Like lots of the worlds richest people, would worry how leaving such a large nestegg would effect my children (after all no-one wants their daughter to be the next Paris Hilton).
Even putting that to one side though, in my twilight years with such huge reserves of cash already, I think as a figure in the public eye, I would be looking at legacy and how I would be remembered, after all, money is pretty useless when you’re in a box 6ft under. Thats just me though and I have no doubt that Bernie doesn’t think that way.
Bernie over the years has done some great things in F1 but I can’t help but feel that when the day comes the majority of people will focus on his more recent escapades and will celebrate rather than mourn his passing.
Obviously Nascar doesn’t have the international reach of F1, and a Nascar race wouldn’t raise the profile of a region in the way a GP does, but it is an interesting comparison. It seems the “good old boys” have their heads screwed on after all, it certainly seems like a much better system than Bernie’s “maximum attack” approach, far too sensible to ever happen though. Equitable splits are just not F1 are they?
I agree with Tim, we spent nothing at Silverstone apart from the camping fee and a ticket. We brought all our food from home.
The type of business to benefit from an F1 race is very restricted, basically only those based upon the tourist industry.
The Olympics is felt by many to be a grotesque and almost criminal waste of tax money. The incompetence of those in charge has more than doubled it’s costs. (sorry I meant profits for the construction companies and general band-waggon hangers on who live handsomely on our taxes eg lawers consultants etc) But the biggest shame is that one cannot buy a ticket for any particular event, the lottery will allocate a ticket for what could be anything, so a fervent gymnastics fan could be forced to watch boxing or just anything! If F1 were organised the same way then you could start of trying to buy a ticket for Spa but be awarded one to Valencia instead.
NASCAR looks from Joe’s description to be a much fairer model for all parties except Bernie, so forget it!
rpaco,
Your experience at Silverstone is not the norm. Regions make vast amounts of money from F1
Joe, are you saying now that the debt is nearly paid off there should be an new financial model that allows tracks to make money and have lower prices for tickets to the public?
Steve
Steve,
I am suggesting that there are other business models that the sport’s future commercial rights holders (whoever they might be), should consider.
Have to agree with Joe.
Whenever I’ve been to Silverstone travelling from ‘oop north’, I’ve stayed overnight in a hotel or campsite in and around Buckingham, going out for a meal and drinks in the town the night before. Not to mention the X amount spent on fuel and in motorway services on the way down and back home.
About regenerating this patch of London (sorry, i mean my Manor*1), well i can see from where i sit, from the city to just about the horizon past the main stadium which is just about covering Newham, in which borough Stratford and the whole build to house the events is.
If regeneration is bringing in lots of hipster pop up cafes, guided tours for mugs down the canal to the building site (which i think is still behind 15′ high fence) and filling the canals with canal boats commanded by either the drunk or dangerously incompetent, well, you got it. The parks are building sites, too. Gone are, and will be because of new edifices, the chances to stand alone amidst windswept green and contemplate the city skyscrapers from afar. I imagine there will be improvements, yes, but just as they were, the parks’ innate attraction was gentrifying this neighborhood at a rate of knots all on their own.*2. What bugs me is the lengths you have to go to find out what is going on behind these (in the parks) 20′ high fences. (What is so secret?) A explanatory sign did appear recently. Dredging the canal was needed, and hilarious (discarded bolt cutters and general housebreaking paraphernalia were my favorite) but emptying the lakes, as a onetime pond keeping enthusiast, enrages me: such things will not settle in nicely in the time they want, or quickly at all.
I don’t know what they were thinking: throwing money at one of the biggest recipients of EU and other regeneration funds and notoriously the one of the most corrupt of boroughs (search for “Tower Hamlets*3. + Corruption” and you’ll find some serious journalists covering the subject) and slapping down a stadium next to one of the liveliest hotspots*4. for MDR TB (the WHO reports citing the epidemic risk have disappeared).
Oh, my mum appreciates the new pavements. But for miles they have narrowed the roads, to get these pavements, causing even more congestion, just where ambulances need to race to the biggest hospital in London. The anti motor car crowd, i suspect, but if so, they are being dangerously anti human life with their lack of planning common sense.
Please excuse my little rant. (psst! Olympic planners, i can be bought off with a F1 track . .)
But i wholeheartedly agree with Joe that F1 is a screaming bargain compared with the Olympics. I can see fast crumbling sites becoming home to feral children in a couple of years*5. Good, get em off my back yard*6 This rush job of construction is simply putting clear demarcation between have and have not areas. The CCTV is upgraded on the main thoroughfare. But mind the myriad back streets which adjoin which are not surveilled.
The robotic response to the economic meltdown is Keynesian. That means there will be tons of public money, and precious little private risk money (equity, capital) and we have a problem of spending it wisely. So, how do we pitch F1 as a worthy recipient of that? Think we discussed that the other day tangentially, but heck it’s the drift of Joe’s blog half the time to find new or better ideas. But it is time to put out the begging bow, and gain some humility. Don;t ask, don’t get. No shame in it. Public money may be about all there is sloshing about if things get much worse.
There is no reason the tracks cannot be bought out, NASCAR style, and no reason handsome incentives cannot be provided to who runs those in contract, to get the best out of them. If someone has just a little vision, they might think how to make races more accessible, not just by reducing ticket prices, but by getting blunt with hoteliers: gouge our fans, we’ll drop next year’s race. (back to my rotation of races affectation *7) Play nice, we’ll accredit you and put you into packages on the main website. (it only just dawned on my thick head that it’s not going to be fun actually getting to races next year, doh).
What we need is a latterday Benevolent Bernie, who has the hard head for playing politics, but whose gameplan is to actually enact positive ideas for the track environs. Joe’s point to extend Valencia into the city is case study: bring the city into the sport, don’t hide it away.
I’f i harp too much about economy, well cop a load of this news: Siemens just withdrew its cash from French banks en masse, and now only trusts direct deposits with the ECB. That must have taken a lot of arm twisting at political levels, and so to get their deposit – since when has a Central Bank taken private deposits? – tacit admissions must have been occurred. *8
. .
Bottom line: it’s all to easy to talk about problems (though very easy to go la la la and cover your ears to them) and F1 needs a positive pitch that works, even against this messy if not entirely grim backdrop. That is the hard bit, because it must be nuanced, genuine, and not entirely rooted in accreting revenue for private buyers.
Maybe allowing the Concorde to expire worthless is the best idea. Default is preferable to unsustainable and deepening debt. The TV contracts and all that go through Bernie, benefit him and his mates. But if the sponsors say they want lots of coverage, free to air, i can think of one company that badly needs something to lift it, and who can stream films just about anywhere in the world: Netflix. Someone call Reed Hastings. He actually sounds like he needs a nice friendly call just now. Don’t know about you, but i could cope with a couple of “non championship” years, s’long as people can get to watch it (and would they not come in droves, from all parts, if we kidnapped the key BBC crowd for the job?) and some hard realities are learned.
That’s the kind of deal i like. Radical, insane, but not throwing the baby out with the bath water. Drain this mother . . . dirty bathwater around the teams. (i said that in the style of getting the snakes off the plane)
– john
*1. Not sure of the origin of calling your neighborhood a Manor is, but most of this area i look out over was private manors, land given for building the canals, railroad style.
*2. see also: http://www.spiegel.de/international/germany/0,1518,786392-3,00.html on the downside of rapid gentrification. Note i am a posh boy, but need the low cost base for work.
*3. Tower Hamlets is vast, it is one of the largest municipal areas in Europe. It adjoins and partially surrounds Newham, where the stadia are.
*4. I have a great pal who caught spinal TB, likely whilst on service, went misdiagnosed, fused his spine, cue decades of agony, so i know my stuff when it comes to TB. If the painkillers work, we’re going to a race or two.
*5. “feral” being the word used by my much more streetwise mate, with whom we found out at least some of the nicer kids who hang about are Lewis fans.
*6. I was strafed by a green laser two weeks ago, my eye possibly saved because i wear coated spectacles, and behind a window. It flaming hurt, and i was very lucky not to suffer worse than temporary occlusion of sight and headaches.
*7. Would fans moan so much if the reason a track was omitted were to be “yeah, not going there, you were going to get screwed.”?
*8. http://www.ft.com/intl/cms/s/0/dca4cc08-e096-11e0-bd01-00144feabdc0.html#axzz1YPK9saYO
For the British GP I always stay away for the weekend, living in London. Its usually in Birmingham and the weekend will cost circa £1,200 all in (Grandstand seat, 3 nights accomodation, food & drink etc) So 75% of my spend is not going to Bernie.
This year I camped for the first time and still spend circa £800 and the ticket was around £300. So still a fair amount in the real local economy.
The bit I don’t get is there are at least a dozen circuits that could host an alternative race, Donington (the fee killed it as the GP venue in my opinion), Magny Cours, Estoril, Red Bull Ring, Imola, Zolder, Dijon Premois, Jerez, Estoril, Mugello, Algarve, Buenos Aires, Taupo in NZ, Kyalami, Adelaide (Part of the circuit) and quite a number in Japan. If the teams genuinely want to control their own destiny why don’t they break away. Then the other circuits would be free to negotiate as well, as if Bernie has no show he cannot charge a fee and surely trying to stop them joining a breakaway would be a restraint of trade. They could set the business model and take the best from all the models.
The obvious real issue is that they cannot always all agree, but that could be overcome by the way it is set up, with other genuine equity parties, not a vulture (oops, venture) capitalist. Something has to give as it cannot go on.
I would love a GP in my homeland, South Africa. But how can we justify spending $100,000,000 on a circuit when we have so many other pressing issues. I understand the benefits of a GP, but we have just held a World Cup and only 1 of the new stadiums (7 in total I believe) built is economically viable. And its not even the one Bernie wants to race around. A viability assessment on that stadium was that the cheapest thing would be to tear it down and plant grass. There in a nutshell is why spending that kind of money on a purpose build faciltity falls down in the third world.
rpaco, The Olympic ticket con (and it is a con) would go further than what you said. It would be like buying tickets for a Grand Prix at Spa and actually receiving tickets to see a BRSCC meeting at Mallory – for the same price as those lucky enough to go to the race you wanted! Oh, and you wouldn’t find out about what you were seeing until months after the money had left your bank account. It makes Bernie’s tactics look saintly!
Some wonderful suggestions and opinions on this topic. FOM, you listening?
The problem is that the Silverstone F1 experience for an ordinary fan is simply not worth the cost of a grandstand seat – I paid £280 this year plus travel & accommodation costs – the reward was having to tramp through muddy, unsignposted fields to get to the track (silly me for taking public transport, I should have known only press/team buses actually get into the track!), wander about trying to ascertain which part of the track I was at (round track signage didn’t say “You are here” for some reason), play hunt the cash machine which no-one seemed to know where it was (there seemed to be only one – somewhere), spend a LONG time queuing up at toilets even while the race was on, sit on a wet seat (I know entirely my own fault for sitting at an uncovered section – I did however get a small paper towel to wipe the seat!) and spend a lovely sweltering 3 hour bus trip back to the train station as the local council had sensibly decided to replace a section of roadside barrier on one of their busiest weekends so kindly closed a whole lane of the motorway – thanks, it made me really want to come back. It simply isn’t good value for money especially in these times & when savings will have to be made as UK fans have to pay for Sky to watch the season or get an FTA dish for RTL.
Tracks seem to be encouraged to splurge on facilities for VIPs and have no money left to provide decent, basic facilities in adequate numbers for paying spectators – increasing spectator numbers to increase revenue merely seems to exacerbate the existing problems – F1 venues are now charging top dollar for tickets but serving up an off-track experience which would be considered unacceptable at a third division football club charging less than a tenth of an F1 ticket.
Joe, thanks for the response.
Probably a bit of topic, but this year I attended my first GP at Melbourne, and my first NASCAR race at Richmond, and NASCAR has got it going on! It is so fan orientated, and everyone is so hyped to be there.
I’m an F1 fan, but there is a lot that the FOM could learn from NASCAR, beyond just revenue sharing / splitting. Going to a NASCAR race is a fantastic experience, I cannot wait to go the next one now, and I’m not even really a huge NASCAR fan. At a NASCAR race anybody can pay for access to the pits and the drivers, and full paddock experience. With Formula 1, you have to know someone, who knows someone, be a minor celebrity, or some business guy who doesn’t give a shit about F1 to get the same sort of access. At a NASCAR race there doesn’t seem to be any elitist bullshit.
In fact F1 could learn a heap from American professional sport. I also went to a Major League baseball game, at Wrigley Field home of the Chicago Cubs, and it was going off, and it was a Wednesday night. Massive turn out, heaps of merchandise to buy, free stuff as you enter, certificates for first timers. I’m not a baseball fan, but the experience makes you want more, they really work hard, they make you feel like you want to be there, and that you want to be a fan.
A few points on this interesting article. Firstly the circuits make much more money than you might think from additional revenue streams, such as catering and merchandising stands. Secondly as to the point about overseas GPs and how many foreign tourist do they attract. I was at the Singapore GP last year. I live in the Philippines (at present) and so I was a tourist proper. I spent $300 on hotel and about the same on flights. Then food and beverages etc. I was one of thousands of overseas tourists and so I would confidently say that the city of Singapore did very very well out of the GP thank you very much. By the way it is a splendid place to go for a long weekend to see the GP, though a touch expensive.
Ian Burgess,
I do not believe they make that much money on catering and merchandising as in most cases the concessions are signed over to FOM.
At $600 million a year, how many years would it take for the circuits to buy F1? It would have to make more sense than paying Bernie $40 million each.
Nick the Hippy,
Thsi is true, but who has the power of vision and the gumption to take on Bernie? The key is Monaco and the President of the ACM has been in cruise mode for 30 years.
@Joe
Circuits get 25% commission from food and drink etc.
But teams are charged €20,000 by Allsport for a merchandising stand.
Karen,
Not exactly generous, is it? How’s Prince’s Gate today?
Pinball,
points such as the ones you make have been belabored for so many years that I feel led to assume that F1 management isn’t interested in the ends they embody. I remember reading the Indianapolis Star during the buildup to the 2000 U.S. Grand Prix; it said that the sport “… makes no pretense of being fan-friendly.” Repeat: NO PRETENSE. As I wrote above, 9/19, 22:55, if one is in the probably last decade of life and even shorter time in business, a choice of short-term mega-profit as a priority shouldn’t surprise anyone.
Brian.
That’s why I stay at home and watch it on the telly! Next year will be doubtful though with only half the races on proper telly. I may give up, depends on how well the race highlights are done for the races which are not BBC covered.
John Other
Were you not aware that common sense was abolished by the Blair/Brown governments and replaced with many hundreds of new laws? Now if you want to stick your fingers in the electric toaster you need not consider whether it is sensible, only what law you may be breaking and who else might be held responsible. Of course you will have completed a full risk assessment for each family member and any possible visitors before even buying the toaster, then received proper training from a qualified instructor wearing a high vis jacket; your certificate of competence must be displayed.
The ECB, is that part of the EU? You know that unelected organisation so corrupt or incompetent that it’s accounts have never passed an audit? Those chaps telling us to tighten our belts and by the way they want a much bigger budget for themselves next year. Soon they will impose a direct tax on financial transactions. ECB, How could anyone in their wildest dreams imagine that a single interest rate could be applied throughout all the countries in the EU this could only work in a single super-state and guess what, that’s what is now proposed, although the soviet Union already proved it cannot work unless it is a dictatorship.
rpaco,
well Heath is at least within my formative memory. So seen it go around a little, was brought up attuned, though head in sand deliberate. Started earlier, this mess you talk about.
Anyhow . . needed a break, no race meet weekend gone, found that this sitcom called “Drop The Dead Donkey” was on C4 on demand. (telly is a F1 delivery mechanism, no more, for me, so i never paid any attention) First series and bits of second you could transpose to any place. Few changes of names. Tight dialog too. Actually i haven’t laughed out loud for a very long time, so if you’re even a smidgeon of the political cynic I am, check it out, or take another look, or just laugh at my naïveté.
EU is not what is appears. Never was. Just tried to convey some of this to a 60yr old American friend over tea. Met 1630hrs, left 2300. Didn’t manage, way too much tea. Not an online kind of chat. Any of it.
Geek hat on: there is loads of effective tax on transactions, see clearance and other matters. CEDEL ring a bell? Word is, this tripped up the “rogue trader” of late. He went from “Black Boy From Bethnal Green” to “Arrogant Young Broker Lives In Gallery Sized City Penthouse” within seconds. (he got conned on that let) I’m glad that when i sell an advert it does not feed such distracting “nuances”, because i get very upset about that sort of call. Sorry, digression, just want to back the local boy. Hey, on that subject, i found the clip, and the whole thing on Youtube, Curtis’ docu on Leeson / Baring. Wonderful bit where Leeson, knowing he’s arraigned, spouts how client accounts were raided all the time, in the settlement (back office) parts. Ring true? Hint: clearing is how ETFs profit their issuers, who neatly manage their own underlying. Can you say the prop desk doesn’t get word?. (can email, or even post, you a ton of papers, they come out of the woodwork now). But even more fun, and this may even have some F1 juice: Nick Leeson’s wife ended up a Virgin stewardess. Oh, Peter Norris, who let the Baring mess happen, is now chairman of all of Branson’s lot. Look at those interviews. It’s shifty versus shiftier. Only one of them looks the camera direct. I know someone a whole other way, who is still mad.
Thing is i am hard on the side of Caveat Emptor.
I can only explain this in one personal anecdote, lovely bastard friend of mine (nicked my bloody wife, damn him, and fair deal if he wasn’t twice my size, calling him on that hurt really badly) a Russian bloke asked me about an aspect of his company. So I suggested i would point him to the bits of applicable law, not a shelf worth, just a few books. His immediate reaction “Djohn, you must not show these books to anyone!”. If that wasn’t punchline enough, there have been books how the markets work presently, in detail, since i was in my teens. Incidentally, i still like this guy, he may have averted (caught) pains i did not need.
If you use political crap to make a trade, however, totally other thing. But how are bankers to act when they inherit smokes and mirrors from nincompoops who can pummel trillions of public money around the place? I just found out, well deduced, the reason why my home structure is falling apart, and the fire safety (there was a fire, could have ended up very bad, still not fixed) was unrepaired despite we all got billed for it – for 7 years at least verifiable – is more a who casts the first stone issue. Interests. I get angry, sure, but what is needed is honest attention to detail.
It’s in the detail, and that is what the individual must choose.
all best from me,
already too much waffle – j
Personal comments aside, politics suck. Cheer up rpaco, stuff all that!
Joe may have headed this “plight of the circuits” [sic] but the real hurdle is i reckon who cares just got sidetracked by politics, and well, maybe we should stand for no more. I mean, we’re just making excuses for ourselves, and who i hear making all this chat about the viscera of F1 are either passionate, partisan or involved. Masse here is passionate. So who we conning? It’s plain silly. Talking for myself, i wonder if it’s not an abusive relationship. Devotion on one side, to ideals and dreams of our youth, and twists and pummeling on the other. Single banner, if you will: Make F1 Not Suck. Screw the rest. Or do we want every fan, and every dedicated journalist to be part time corporate investigators, as opposed to enjoying what goes on on the track? I grew up with the adverts working for F1. Quite a lot of people think it was better before then, and have good arguments. But the sheer FU of it all before all that is not something i associate with just balls and danger, equally it is just saying when we get off. It’s cart before horse, and we need to rethink. After all, aren’t the fans the eyeballs, the commodity which is traded? (to take the mick right out of current playbook) Advertising ought to be a adjunct to what is happening, it presents well as a “oh, just saw that” thing. Which actually worked nicely. It’s not the be all and end all, and changing that back would put no-one out of work who was working.
So, mea, i’m as bad as the rest, sniffing and digging about – worse be it from afar – but geez, got to stop. I dig muck for a living precautionary, gets bills paid. Want race day to be better.
Joe, well would look cool, a decent weather chart for your site. Buggered if i can find one who does real time radar for Singapore, i mean a bit low down detail. ROW got a half decent offering: Stormpulse. Check them out. Esp w/ mind of the US flyaways.
over and out,
very best to all,
– john