A lot of people think that the fees for Formula 1 races are excessive and I tend to agree in some cases, but when you compare what a country gets for, say, an Olympic Games, or a World Cup, compared with what they need to invest, F1 seems to be a pretty cheap option. The problem is that for reasons that we can only guess at cities don’t want to give money to the Formula One group, while they are more than happy to pay the demands of the IOC or FIFA. It is billions on the one hand and tens of millions on the other. Why is that? Particularly when an Olympics or a World Cup are done and gone in just a few days, while F1 keeps coming back, year in, year out. TV audiences are not really the answer either. It seems to be more about civic ego: a Mayor or a Prime Minister can fluff up his feathers as having been the one to win the city the Olympics etc etc. The IOC and FIFA demand massive infrastructure investments and I suppose that might be part of the attraction as this forces cities to make changes that they want to make, rather than constantly putting them off. London, for example, has developed much of the old docklands that ought to have been done earlier, but the Olympics gave them the excuse. This creates jobs and visitors. Getting private enterprise to invest in these events is a tough call. There are the big sponsors, of course, but public-private partnerships for other things do not seem to be that successful. Perhaps they are and we just don’t hear about them.
Of late, however, I have being hearing whispers of new plans for a Formula 1 event in the Bay Area of California and, more specifically, down in the Santa Clara/San Jose area of Silicon Valley. It has been clear for a long time that F1 needs to get more races in the United States and , obviously the most likely places for the sport to visit and be successful are the two coasts, which have a rather more outward-looking attitude and would most appreciate F1’s European chic and glamour.
Sadly, attempts to have races in New Jersey, Long Beach and Anaheim have all flopped because of the amount of money that was being demanded, and because there are very few public bodies that can afford F1 scale money for a sporting event or which would deem such an event to be worth the cash being demanded. The race in Austin has got some state backing, but the state politicians are looking at cutting this back because it was all agreed by a different administration and the new folk don’t want to pay the money any longer. This is short-sighted but to be expected.
So how can an event be funded in the US? The only answer is really private money with, perhaps, a little bit of public money being used to facilitate things.This is the only model that will work, but who has the kind of money that is required for an F1 promoter these days? Right now, the city of Boston is planning for an IndyCar race around the streets, but the city is only paying for modifications for some of the “street furniture” and is recouping money, in theory, on renting the streets and the necessary services to the promoters. But then IndyCar fees are not that expensive so the promoter thinks it can make a go of it. This is great news for IndyCar, which needs a presence in urban areas on the East Coast.
Deals in Formula 1 are now running at levels at which even some despots cannot afford to pay for a race. Having said that, there are some very good examples of business models that do work for F1. They are complicated but they work. Canada, for example, is funded by at least four different levels of government, plus tourist boards and chambers of commerce. They all pull together to make the race happen. That has been true for some of the European races as well, notably Spain and Monza. Almost no races operate without a public subsidy. Silverstone is unique in that respect. Singapore is partially funded by an entrepreneur who owns shops, restaurants and hotels all around Singapore, with the government kicking in the rest, although if the race makes profits that money will go to the government. These have to be the kind of arrangements today and for new races to be successful one needs to find people to pay. There have beens one pretty imaginative ideas, but not all have worked. One that I thought was genius was using F1 to give drab places sparkle and by doing so raise the land/house prices. That was the logic behind the races in New Jersey, India and Korea
It was interesting, therefore, to see that Apple, which never sponsors sport, has been involved in the funding of the upcoming Super Bowl 50, to be held in the Levi’s Stadium in Santa Clara, home of the San Francisco 49ers, 40 miles south of the city itself.
The city of Santa Clara decided to create a tax-exempt public authority called the Stadium Authority, some years ago in order to build a new stadium. It cost $1.3 billion, which is a lot more than your average F1 track. Ninety percent of this money was funded by the sale of stadium assets, a hotel tax, the 49ers and the NFL. The City of Santa Clara contributed only $114 million in public contributions. Levi Strauss purchased the naming rights to the stadium for 20 years for $220 million.
Lots of local companies were involved in the Super Bowl bid. The Super Bowl 50 Host Committee, registered as a nonprofit organization, which is useful for tax purposes, has raised around $50 million for the bid from Bay Area companies and has already pledged $12 million to more than 100 local non-profits companies, aiming to be create a solid legacy and the image of being philanthropic, rather than just sucking up money. A lot of the donors want publicity but some just want to help the community but stay low-profile. It is all probably tax write-offs anyway…
But if these companies were willing to pay to bring the Super Bowl to the city, it is a safe bet that they would invest also in a motor racing facility that would benefit the local area. Such events are of huge value to local communities and the big technology companies want to help that. Apple does not use sponsorship because it considers its brand to be more valuable than the other brands is would be associating with.
Silicon Valley is the home of a string of the world’s largest high-tech corporations, as well as thousands of startup companies. The area attracts one-third of all venture capital investment in the United States and the cluster features glogal giants such as Apple, Google, Yahoo!, AMD, Cisco, eBay, Electronic Arts, Adobe Systems, Facebook, Hewlett-Packard, Intel, Lockheed Martin, Oracle Corporation, Telsa, Symantec and many others.
In this world $500 million over a 10 year period would not be a huge amount of money and all that is really required is for someone to put it all together to give the area an association with the glitzy high-tech world of F1, which is sexy technology rather than nerdy technology for which the region is better known.
It would obviously help that there is a good chance that Alexander Rossi, a young Californian driver, could be racing, and that there will be Haas F1, part of an industrial empire, headquartered in California, albeit in the south.
There would, therefore, seem to be plenty of potential to create some kind of bayside park, a semi-permanent facility that would follow the lines on an Albert Park or a Circuit Gilles Villeneuve…
Time will tell.