The Nurburgring had a deal to alternate the hosting of the the German GP with Hockenheim each year, but was unable to host this year’s event due to financial issues. The 2016 race will be held at Hockenheim, but the chances of it returning to the Nurburgring in 2017 are look increasingly slim.
To mitigate the astronomic costs of hosting a Formula One event, the two circuits in Germany devised the alternation agreement despite both the Nurburgring and Hockenheim having access regional state funding. Even so, neither have been paying anything like ‘rack rate’ Bernie Ecclestone demands as a hosting fee.
The Nurbrugring has been losing money for years, by the tens of millions, and was put up for sale in 2014. The sale offer for the historic motor racing venue included, hotels, a theme park, the modern racing circuit and the infamous 12.93 mile long Nordschliefe, nick named the green death. It was finally sold to investors known as Capricorn and Getspeed in a deal worth 77 million euros.
Capricorn’s share in the deal was two thirds, however they ran into financial difficulty towards the end of 2014 and were unable to complete their payments on the acquisition. Up stepped Russian billionaire Viktor Kharitonin, he bought out Capricorn and now has a controlling stake in the famous German motor racing venue.
A certain Bernard Charles Ecclestone was also a bidder during the original sale process, but was outbid by Capricorn and Getspeed. He later reflected, “It’s a pity, because when the Nurburgring was for sale, I agreed to buy it. They came back to me and told me that they had a better offer, maybe one or two million higher than my offer. I said: ‘I made only one offer. If somebody wants to pay more, sell it to him.’ They’ve sold it to a person and this person resold it”.
The Ecclestone offer in all likelihood included a favourable deal for the venue to host an annual Formula One weekend, though at the time Ecclestone’s stock in Germany was not exactly at an all-time high. “The stupidity was that because of two million they’ve lost somebody who had guaranteed that there would have been races for 100 years,” Ecclestone told Motorsport Magazin. “They ran away for a few dollars more. And what did they achieve? It’s disappointing and annoying for me. That’s why we’ve lost the Nurburgring.”
When asked if Formula One would return to the Nurburgring, Ecclestone was catagoric: “I don’t believe that it will happen,” adding, “We can say for sure, that there will be no race.”
Nurburgring hosted a round for the NEC in 2015, which was a huge success in terms of fans attending and profit on the bottom line, it may well be for this circuit, Formula One has just had its day.
The Formula One ringmaster now reveals the fate of Germany’s other F1 event is in doubt. Hockenheim has a contract to host Formula One in 2016 and in 2018, but beyond then Ecclestone sees their future to be bleak. “We really have an extremely favourable agreement with Hockenheim,” he said, “which will not exist in the future. They will have to accept what other European countries pay.”
Hockenheim last hosted the German GP in 2014, though the attendance numbers were meagre with just 50,000 in attendance on race day. Tickets for the 2016 German GP went on sale and the organisers are attempting to entice the fans back – with discounted tickets prices. However, should this tactic fail, then when the current deal with Ecclestone expires, Formula One will be no more in Germany.
The current list of true European races for 2016 is as follows
- Spain
- Monaco
- Austria
- United Kingdom
- Germany
- Hungary
- Italy
- Belgium
Were Germany to leave the calendar for good, this would leave just 7 European races in a year where there are around 20 F1 events worldwide. However, the inclusion of Baku as the ‘European GP’, gives Ecclestone a buffer to ensure he is not in breach of the bi-lateral agreements with the FIA and the teams which states a minimum number of races must take place in Europe.
Meanwhile in Azerbaijan, the government may be considering tearing up the streets paved with gold and cladding them in a more modest fashion. Yesterday, the manat collapsed, losing 32% of its value against the US dollar. This followed the central bank’s decision to stop protecting supporting the currency claiming that this course of action had wiped out more than half its foreign reserves.
“Azerbaijan has moved to a floating exchange rate but someone forgot to teach it how to swim,” quipped opposition member and economist, Natiq Cafarli.
This is the second time this year the manat has suffered drastically due to government policy. In February, the currency devalued a third against the dollar and now there is concern there will be a banking collapse in the country.
Azerbaijan is heavily dependent on the export of oil and gas and last week the price of oil collapsed to an 8 year low. Russia is struggling too, with 40% of its GPA in recent years being energy export related.
Goldman Sachs recently suggested that the oil price has a lot further to fall yet – and that it could be as low as $20 a barrel by January 2016. Interestingly, as part of the next trillion dollar budget spending agreement, the USA announced it will be lifting a forty year ban on oil exports, which has been in place since the Arab oil embargo in 1973. This will add to the excess capacity in world markets still further and then of course Iran is set to compound the problem as international embargo’s on Teran oil exports are now being lifted.
“Formula 1 will never collapse, even if we had lost Red Bull and Lotus,” asserted Ecclestone recently. Yet the commercial rights holders may be wondering if the right business strategy for the sport is being pursued, as the latest annual figures demonstrate less than $300 million will be available to them as profit.
It will be interesting to see the reception Formula One receives from the people of Azerbaijan, who yesterday scrambled to convert their manats into foreign currency or durable goods. Will they be impressed by the opulence and glamour of the circus, or be still angry at their government’s policy which has led to the price of goods rocketing and their wages and pensions devalued by almost 60%?
Bernie Ecclestone should re-think his plans for Formula One; chasing the oil dollar to sustain the racing calendar, may soon no longer be an option. And it could just be that record lows in the price of the ‘black gold’ will be the saviour of the European races, which cannot compete with the fees paid by those made rich by oil.
Azerbaijan now comes across, more than ever, as a one year deal designed to boost revenues and bottom line figures in the hopes that CVC can successfully unload F1 shortly.
In any case, CVC’s business model for F1 appears to be ready for either A) a re-think, or B) decreasing margins.
It isn’t the season to be punitive, but I’d be delighted if CVC receives some fiscal pain as the result of their management of F1.
The problem is the teams get a % of profit!! So lower income for CVC means less money for teams! Some teams already struggling and it’s going to get worse before it gets better. Bernie is going to have his hands full keeping enough teams in F1 to satisfy his contracts with the venues. While not being bled dry (if he ever could be) by some of the small teams asking for hand outs. His only hope is to come up with either an alternative Cheap PU or get a cap and mandatory supply put on PU manufacturers.
He and CVC have missed selling F1 at it’s peak. I think they now have a fight on their hands to stop F1 going under!
Ched, I don’t disagree with you regarding costs, but there are many who will. It surprises me how many still believe that if a team can’t spend 300+million per year they don’t deserve to be in F1.
Like all problems in F1, this one’s pretty easy to solve if you’re prepared to see through all the BS.
Simple fact of the matter is, the big teams are spending way too much money, and FOM have to pay 65% of any money they make anywhere to the teams.
Get the bigger teams budget down, everything else follows suit and falls into place.
WHAT IF: Bernie dies. Bernie’s like the plate-spinners–put a plate on a pole and spin it, do it with plate #2, #3, and so on, going around to each one to keep them spinning until you reach your limit for keeping all spinning. Who will do that with F1 if Bernie dies? Who CAN do it?
Should it be really a concern? Didn’t we want less of oil states on the calendar?