Quick Quiz: Name the US circuit in the picture above
In 2014 Bernie Ecclestone managed to pay $100m to a German court and in return the charges of bribery against him were dropped. This gave Ecclestone a new found confidence who was backl to making pronouncements,’the Bernie way soon after’. One of the more amusing was when Ecclestone stated he had no interest in attracting young fans to Formula One because they could not afford to buy a Rolex. “I don’t know why people want to get to the so-called ‘young generation’. Why do they want to do that? Is it to sell them something? Most of these kids haven’t got any money. I’d rather get to the 70-year-old guy who’s got plenty of cash”.
And to some extent Bernie has a point because most revenues raised by sport globally are done so on the platform of selling something to the spectators/viewers. In its purist form, the fans themselves pay to watch the sport – whether by attending an event or by paying for subscription TV.
Free to air TV has historically delivered sport to fans at no cost, because sponsors and advertisers pay the broadcaster who in turn pays the sporting organisation the fees they require. And despite the veneration paid to F1’s genius architect – ‘the honourable Lord Bernie’, it was this simple model he first employed to increase revenue into Formula One – charge the TV companies. Whilst hardly a strategy requiring rocket science type thinking, Bernie has been revered for years because of this turnaround in F1 funding during the 1980’s.
At that time the track owners contributed little or nothing to F1’s coffers, but took the risk of promoting an event and as reward received ticket and merchandising sales together with track side advertising. The profit incentive meant there was even competition amongst promoters to hold certain national F1 grand prix.
Having stepped in at the last minute to save the 1974 Belgium GP, Ecclestone was aware of the cash available to race promoters, so as the easy TV money became ‘maximised’ he turned his attention towards the promoters for more and more revenue. Hosting fees were hiked ever higher and the track side advertising revenue was snatched from the local venues too.
Given some of the deals done recently in Canada and Australia, it would appear Ecclestone has probably maximised the monies he can extract now from most race promoters – particularly because few are self-sustaining events and most rely on local governmental funding. However, with the number of fans falling at many F1 events, the current levels of race hosting fees may soon come under pressure – particularly for the likes of Silverstone who’s fee to FOM is set to double in less than 10 years.
More races per season has been part of Bernie’s recent solution – and racing more in the East where officials in less democratic countries find it simpler to procure eye watering amounts from the public purse to deposit in FOM’s bank account.
However, the TV revenues and numbers of fans attending races in ‘F1’s new world’ in the East, are no match for those in F1’s heartland – Europe. Even TV audiences in the USA have been on the up and on occasions this year have exceeded SKY UK’s live race viewership – even when they have exclusive live UK coverage.
Other than adding ever more races, Ecclestone looks as though he has run out of ideas on how to build F1’s revenues, yet the biggest opportunity and smartest approach is staring Bernie in the face.
At the 2015 Russian GP, Ecclestone gave an interview to a local broadcaster claiming Putin was a “super-guy” and “democracy is over rated”. Ecclestone also said of the USA, “the biggest problem with them is that they believe [that they are the] greatest sort of power in the world”. Also that “they are a big island, so they are a bit isolated; they are slowly starting to learn what other people in the world do”.
This is code for Bernie so far failing to hoodwink anyone else in the USA into promoting the New Jersey GP and coughing up $40m plus to FOM. Ecclestone concluded his Russian interview saying, he was “not very enthusiastic about America”.
And herein lies the key to Bernie’s ultimate failure to take Formula One to the next level. US race promoters can do maths and know they cannot sell enough hot dogs to put on a race AND pay Bernie around $40m. Yet were more races to be scheduled in the Americas, the US TV audience would continue to build – along with TV revenues.
U.S. Grand Prix organiser Jason Dial hit back at Ecclestone following his comments in Russia. “Obviously, he’s entitled to his opinion,” said the president of the Circuit of the Americas. “The team principals that we talk to unabashedly state how important the U.S. market is to them and their sponsors,” he added.
Then there’s the importance of the USA to sponsors, eloquently expressed by Pirelli’s Paul Hembery who began his US GP weekend preview by stating, “The United States always offers us a very warm welcome and a fantastic race weekend. Like all the other stakeholders in Formula One, America is a crucial market for us so it’s very important for us to have a race there”.
Following his love in with Putin, Bernie Ecclestone appeared to suggest he was working on another race for the USA in southern California. Yet US GP race promoter Bobby Epstein suggests Ecclestone’s amitions are not sufficient to embed Formula One within US sport’s culture. “Two races wouldn’t help much,” he told the Guardian. “But six could. I’m talking about building an audience. You have to get up very early in the morning to watch F1 in America. So if you had six races in this time zone, it would make a big difference.”
Six races in the USA appears a lifetime away, given F1’s history with that part of the world. However, a mini season of 6 races in the America’s as a whole could be a way of building momentum with US TV viewers. Currently there are four races in the America’s – Montreal, Austin, Mexico City and Sau Paulo. If another one or two races were added in the USA, these 6 events could be scheduled one after the other changing the TV habits of motor sports fans across ‘the pond’.
Given that SKY UK pay around $100m a year for the privileged of broadcasting F1 each week to a UK audience of mostly under 1 million, what kind audience could be built in the USA if Formula One was regularly broadcast live at civilised times – and what kind of broadcasting revenues could then be charged?
Given Bernie coughed up $100m to the social fund of Bavaria last year, maybe a $100m spent on establishing 2 more F1 races in the USA (whilst cancelling the ridiculed events held in Baku and Sochi), would pay a handsome dividend to F1’s owners in medium term.
So TJ13 jury, where could F1 race in the USA? Are there any venues where the cost of bringing a circuit up to the FIA category 1 standard would not be too great?