The weakness of the F1 promoters

The Formula 1 race promoters have long griped and grumbled about the costs involved in hosting World Championship events and have tried to get the Commercial Rights Holder to reduce the fees or to allow them to keep of the available revenues.

The problem is that the race promoters have never really wanted to make too much noise, in case they lose their race, but at the same time they have little chance of success if there are always others willing to step in to host races. There is no necessity for any promoter to continue if they do not want to do so and there never seems to be a shortage of replacements. It is a question of supply and demand. The weakness of the promoters is that they have never been able to work together because ultimately they only have their own interests at heart.

The Formula One group is unwilling to make too many concessions - and does not need to - because its exists to generate revenues, although at the same time it wants to expand the sport into major markets that Formula 1 has never properly exploited and thus they are willing to help new events to develop, which is something that obviously annoys the traditional races, which struggle to make ends meet.

Last week, the Formula One Promoters’ Association, published a statement (right) listing some of their complaints. Only 16 of the 21 promoters agreed to be included as signatories of the letter. They argue that it is not in the best interest of the sport that fans lose free access to content and broadcasting; that there is a lack of clarity on new initiatives in F1 and a lack of engagement with promoters on their implementation; and that new races should not be introduced to the detriment of existing events.

The association said that it was, nonetheless, encouraged by the alternative business models being offered to prospective venues.

The statement called for “a more collaborative approach to the development of the championship and the opportunity to offer their experience and expertise in a spirit of partnership with Formula 1 and the FIA”.

It is not clear what the statement is intended to achieve as the Formula One group will view such a move as being unhelpful and unnecessary.

On the question of broadcasting, the new owners of Formula One, Liberty Media are, to some extent, stuck with broadcasting deals which were agreed before they took over the rights. At the same time they are developing direct-to-consumer OTT services which will cost money, but not nearly as much as they do today.

With regard to the supposed lack of clarity, it is really not clear what the race promoters want, as the Formula One group has given a fairly clear picture of what they want to do with the sport and how that will be achieved. On the question of competition from new events, it is fairly clear that the market will rule the decision-making. If there are promoters willing to pay more, the others must step up to remain part of the game.

Thus, it is not clear what the statement aims to do, except to draw attention to the fact that they exist. This will not change much. If they are to develop any real power within the sport, the promoters need to be the only choices available, but there is no shortage of new venues and still plenty of potential to expand the business further.

Almost all the existing races are now supported, to a lesser or greater extent, by public money of one kind or another and there is no doubt that hosting a Grand Prix remains a very valuable activity if one has the means to remain in the game.

This is why the governments are happy to pay. The problem comes in countries where the government will not pay, or where sport is sold cheaply, notably in the United States where a city can secure the Super Bowl for relatively little and even if there is a requirement to build a new stadium, which is often the case, the city benefits from that long after the event and all the additional benefits clearly make it a worthwhile experience both financially and for the development of tourism for a region or city.

F1 is not a cheap option but as has been seen in Texas the revenues generated make it worthwhile for the local economy. Different races have different business models, but special taxes in the week of the events help to offset the costs. The race in Singapore, for example, has been a huge success as a private-public partnership. 

There are often intangible benefits that generate revenues for cities but in places like Australia these are never included in the official calculations which leave the events open to criticism from those who are opposed to the concept, even if very often they are also benefiting from the success of an event. Melbourne used to have some opposition from the Save Albert Park organisation, but in reality the race has helped to drive up house prices in the district and so the opposition has now all but disappeared.

The most likely explanation for the FOPA statement is that the British Grand Prix is currently facing extinction. Silverstone took the decision to cancel the F1 contract early, to avoid putting the British Racing Drivers’ Club into potentially difficult circumstances, and as yet no deal has been found to keep the race alive.

The problem is real, but the gap between what Silverstone can pay and what the Formula One group wants is believed to be relatively small so a solution should be found.

At the root of the problem is that the British government will not get involved, although they are happy to pay for an Olympic Games or for the Tour de France and other such events.

At the moment British politics is so beset by Brexit that no-one seems to have focussed on the issue of the British GP and it may require the country to have a year out of the World Championship to get their attention. After that if Britain does not want a Grand Prix, it will not have one (just as happened in France between 2008 and 2018).

Source: JSBM