Grand Prix promoters criticize F1 owners Liberty Media [split]

Which is to be blamed upon the teams. Horner some months ago crying about inevitable let go's if the budget cap would be introduced. Well.. euh.. duhhh.. ofcourse there will be people who lose their jobs. But it is the team in therst place who decided to hire 43 valve cap technicians instead of 1.
Liberty should just enforce the budget cap without any concessions. Teams will shudder. People will lose their job. Thats the price F1 teams will have to pay for having lead this exorbitant lifestyle all these years. And yes, Liberty/FOM/FIA is the one to bame not to have closed this down earlier. But teams will keep this up, so something has to be done.

I've said it before, but I'll repeat myself, the total cost of the sport of having 10 teams spending $100M is $1Billion. Now rather than people lose jobs you could spend the $1Billion on 13 teams spending $77m each or 15 teams spending $67M each. OK a budget cap may cost some people jobs in the short term, although in the long term it would save more, but the other effect could be you end up spreading the expertise out with more small teams and a better, financially healthier sport.

I've said it before, but I'll repeat myself, the total cost of the sport of having 10 teams spending $100M is $1Billion. Now rather than people lose jobs you could spend the $1Billion on 13 teams spending $77m each or 15 teams spending $67M each. OK a budget cap may cost some people jobs in the short term, although in the long term it would save more, but the other effect could be you end up spreading the expertise out with more small teams and a better, financially healthier sport.

Price controls/Budget limits call them what you want never work in the real world.

Price controls/Budget limits call them what you want never work in the real world.

Franz Tost would disagree with you - https://www.thecheck...formula-1-tost/

Price controls/Budget limits call them what you want never work in the real world.

Que? Have you ever worked in business? Budget limits happen all the time, sometimes fail, but usually do work.

The blunt truth, though, is that everyone knows what the terms are and all, so far, seem to have been happy to sign those contracts. Who do I think is more competent at running a series/business? The ones who signed contracts that they cannot afford or the ones that are the beneficiaries?

Certainly, as has been mentioned, Silverstone seem to have little problem filling the place, yet they are being bankrupted by the contract that they signed. Perhaps they should first try doubling the ticket prices. If the attendance falls, then they have a point. If it doesn't, they've increased their revenue and they'll have a better understanding of their market. They will be in a better position to pay their bills.

Edited by pdac, 30 January 2019 - 22:50.

The blunt truth, though, is that everyone knows what the terms are and all, so far, seem to have been happy to sign those contracts. Who do I think is more competent at running a series/business? The ones who signed contracts that they cannot afford or the ones that are the beneficiaries?

Certainly, as has been mentioned, Silverstone seem to have little problem filling the place, yet they are being bankrupted by the contract that they signed. Perhaps they should first try doubling the ticket prices. If the attendance falls, then they have a point. If it doesn't, they've increased their revenue and they'll have a better understanding of their market. They will be in a better position to pay their bills.

$1 billion divided by 16 = $100 million each ? I'm glad you aren't running the budget with your shonky grasp of mathematics.

 

It's not a shaky grasp of mathematics.  It's first hand knowledge and experience running a business at scale.  The prize fund alone is US$1 billion.  The scale of the team businesses count on that revenue.  Plus Ferrari getting some straight off the top.  Are you expecting them to operate at the same level with less funding?   The author that shall not be named from Forbes reports in 2017 the teams spent a combined US$2.6 billion.  

It costs money to set up and run a series.  That's where the extra six hundred mil comes in.  You'll need a couple/few hundred to get it up and going.  Then you'll need operating cash.  You'll need TV production and TV deals.  Air cargo is not free.  Support systems aren't free.  Hotels and flights aren't free.  Sanctioning employees aren't free.  You're replicating not only FOM but the F1 part of the FIA.

Current revenue for the Formula One Group was nearly US$1.4 billion.  All of that spent between teams, operating costs and a profit for FWON.  That's going to be the minimum required to maintain the current scale.  Add to that the new guys wouldn't have any of the infrastructure in place and a US$1.5-1.6 billion seed for the first season is not a reach.  If anything it might be a little slim.  Since there are no more sanctioning fees and likely won't be the kind of TV revenue from previous seasons (if any) and likely few big ticket sponsors coming on board at first they're also not going to have much in the way of revenue.  If any.  That's going to be another billion plus investment for the second season.  Where does it end?  What's the revenue model for sustaining a competing series at the scale of F1?  

To think the tracks or even the big teams would be successful at a breakaway series is a stale Guinness fever dream.

Haha, yeah, let's double all ticket prices. Genious solution.

The point pdac is making is there is a ceiling in which the cost of the product decreases the demand.  Basic supply side stuff.  If a track sells out quickly at $100 a ticket then you raise the price to $200 and it still sells out then that means you didn't price your wares to realize your full profit potential.  The goal of running a business is to maximize profit and not to provide us with below market cost on the goods it sells. (though I do like a good deal...)   Obviously there is a threshold and finding it can be tricky but the point remains that you have to price your goods in a way you can make money on what you buy them for.

I've said it before, but I'll repeat myself, the total cost of the sport of having 10 teams spending $100M is $1Billion. Now rather than people lose jobs you could spend the $1Billion on 13 teams spending $77m each or 15 teams spending $67M each. OK a budget cap may cost some people jobs in the short term, although in the long term it would save more, but the other effect could be you end up spreading the expertise out with more small teams and a better, financially healthier sport.

Personally I would be fascinated to see what would happen if a track racked up its ticket price.

We have seen what happens with gig tickets if they get scarce, people get silly.

I doubt that would happen with F1 tickets, but it does seem some folk have a weird concept of what value is when it comes to events.

Originally posted by paulstevens56:

 

Personally I would be fascinated to see what would happen if a track racked up its ticket price.

That's what happened at Montréal between 1989 and 1990. Attendance did not go down. Far from it, actually.

Que? Have you ever worked in business? Budget limits happen all the time, sometimes fail, but usually do work.

But who is creating the budget limits?  To me there is a significant difference between internal and externally placed budget controls.  Once is much more enforceable.

Originally posted by paulstevens56:

 

 

That's what happened at Montréal between 1989 and 1990. Attendance did not go down. Far from it, actually.

That is 30 years ago. People nowadays are a lot more critical where they spent their money on events.

How much is a ticket for Silverstone these days?

On the teams having to lay people off, if you need to employ 700 people to design build and run 2 racing cars there is something seriously wrong.

It's not a shaky grasp of mathematics.  It's first hand knowledge and experience running a business at scale.  The prize fund alone is US$1 billion.  The scale of the team businesses count on that revenue.  Plus Ferrari getting some straight off the top.  Are you expecting them to operate at the same level with less funding?   The author that shall not be named from Forbes reports in 2017 the teams spent a combined US$2.6 billion.  

 

It costs money to set up and run a series.  That's where the extra six hundred mil comes in.  You'll need a couple/few hundred to get it up and going.  Then you'll need operating cash.  You'll need TV production and TV deals.  Air cargo is not free.  Support systems aren't free.  Hotels and flights aren't free.  Sanctioning employees aren't free.  You're replicating not only FOM but the F1 part of the FIA.

 

Current revenue for the Formula One Group was nearly US$1.4 billion.  All of that spent between teams, operating costs and a profit for FWON.  That's going to be the minimum required to maintain the current scale.  Add to that the new guys wouldn't have any of the infrastructure in place and a US$1.5-1.6 billion seed for the first season is not a reach.  If anything it might be a little slim.  Since there are no more sanctioning fees and likely won't be the kind of TV revenue from previous seasons (if any) and likely few big ticket sponsors coming on board at first they're also not going to have much in the way of revenue.  If any.  That's going to be another billion plus investment for the second season.  Where does it end?  What's the revenue model for sustaining a competing series at the scale of F1?  

 

To think the tracks or even the big teams would be successful at a breakaway series is a stale Guinness fever dream.

Quite. The biggest issue for a breakaway isn't even finding the money, it's where the money comes from and what the benefactors want in return. No-one's floating a ton of seed capital to a frivolous sporting venture on this scale without having some incentive to do so.

I have to laugh at people who think that a breakaway needs to be more traditional, yet can't see that the most obvious sources of funding for a breakaway would be from China, Russia and the Middle East. Can't see that manufacturer interest and funding will only come with turbo hybrids and a say in the rulebook. Can't see that lucrative TV deals can only come from pay TV companies.

They'd be breaking away from F1 to compete in an almost identical clone, albeit one that carries the same risk as any other startup.

Haha, yeah, let's double all ticket prices. Genious solution.

What makes you think that's funny? Just rack it up and see what happens. If they are going bankrupt anyway, what do they have to lose? It's just stupid to have such a large following and lose money from them. First rule of business - believe in your product (even it it's crap).

 a stale Guinness fever dream.

That's a curious expression, have you and Kodza been down the pub again?

Edited by RacingGreen, 31 January 2019 - 21:07.

Whether a breakaway series could be financed or not is an interesting question; personally I Think that it could, not least because there would probably not be more than 10-12 races if even that.

 

More to the point is the very sad, and to me entirely misplaced, perception that a professional sport like this must produce large financial returns for a third party Investor at all. This is a structural fallacy invented and introduced by the original greedy moneybags Messrs Ecclestone and Mosley (don't forget him) and continued by Jean Todt, the latter surely being the least effective head of any sports sanctioning body.

 

If this overriding financial interest to the benefit of third parties were removed, then obviously the funds required for organising races - or indeed running teams - would diminish.

 

Personally do not Think that breakaway series will not happen if Liberty/FOM/FIA are prepared to change - but the possibility is certainly there.

 

As for the name...Grand Prix racing, anybody ? 

nail, hammer, head.  i dont recall the exact percentage, but i believe its 60 odd percent that FOM/liberty take from the earnings. And its all thanks to a shady deal that bernie and max did a long time ago. What do they do exactly to earn this ridiculous amount of money? Even if it is 40 percent, the same applies.  bernie and max sold it all down the river long ago and as a consequence tracks, fans. spectators, teams etc are being squeezed for every last drop.  no wonder it is such a tasty morsel for bankers and other money men who literally have no interest in the well being of the sport.  that being said, at least liberty seem to trying to grow the pie.

Chase Carey is a little bit... baffled at the whole thing, if that's the right word:

https://racer.com/20...ters-criticism/

Chase Carey is a little bit... baffled at the whole thing, if that's the right word:

 

https://racer.com/20...ters-criticism/

Well that's not at all concerning for Formula One. 

Chase Carey is a little bit... baffled at the whole thing, if that's the right word:

 

https://racer.com/20...ters-criticism/

I like the bit where he describes 15 out of 20 promoters as being  '...one or two..'  Either arithmetic isn't his strong point or he has his head firmly in the sand (or somewhere else less pleasant...)

Edited by BRG, 05 February 2019 - 19:15.

Should FOM start renting tracks and become the promoter?

I'd have to think Hungary is the first to go.

But how Liberty go on without Spain, Germany, France, UK, Italy, Monaco and Belgium is beyond me.

I'd have to think Hungary is the first to go.

 

But how Liberty go on without Spain, Germany, France, UK, Italy, Monaco and Belgium is beyond me.

Should FOM start renting tracks and become the promoter?

Well in most cases the promoters are subsidized by the local government(s), so that would remain in place.

I think France was brought back because of Liberty, which is why I don't quite look at how Bernie operated as being precedent to their actions.

I think the best thing for Liberty is to bring as much as they can in-house. Less public grief, more control.

Well in most cases the promoters are subsidized by the local government(s), so that would remain in place.

I think France was brought back because of Liberty, which is why I don't quite look at how Bernie operated as being precedent to their actions.

I think the best thing for Liberty is to bring as much as they can in-house. Less public grief, more control.

Edited by Clatter, 05 February 2019 - 22:36.

Technically the Formula One headquarters is in Engelwood, Colorado but for practical purposes I'd consider it to be the offices at St. James Market.

In a way, if this has turned into a battle between FOM and the promopters, it would serve Liberty well to let Silverstone go (or, at least, make no effort to help them). I think it would really scare the other promoters if that happened.

I'd have to think Hungary is the first to go.

 

But how Liberty go on without Spain, Germany, France, UK, Italy, Monaco and Belgium is beyond me.

They run the risk if too many tracks become available to a rival series, you could recreate some kind of 'new-F1' on the proper tracks in F1's European mainland. And those races would start 10 minutes earlier as well, making viewers miss Liberty-F1 as well. 

Can you imagine the absolute shitstorm though if we didn't have a British grand prix? One of the most successful events on the calendar in terms of attendance. The home of a large majority of F1 teams. Is it not also the home of F1 HQ??

Inside Britain: high

Outside Britain: not so much. We've lost France and Germany before.

In a way, if this has turned into a battle between FOM and the promopters, it would serve Liberty well to let Silverstone go (or, at least, make no effort to help them). I think it would really scare the other promoters if that happened.

They run the risk if too many tracks become available to a rival series, you could recreate some kind of 'new-F1' on the proper tracks in F1's European mainland. And those races would start 10 minutes earlier as well, making viewers miss Liberty-F1 as well. 

 

 

 

Inside Britain: high

Outside Britain: not so much. We've lost France and Germany before.

Yeah if we can lose Germany with Vettel and then Mercedes dominating, we can lose UK, for sure. Considering that 95% of the audience watches on a screen, it doesn't actually matter much at all where the races are physically held, other than the revenue opportunity and promotion. For Liberty who are here to make money not for the love of motorsport, I can't beleive they have any other criteria. 

Sadly the track would probably fold if they lost the GP, I doubt anything else there generates the necessary income to cater for the developments and things going on.

The other big meetings they still have to pay rights for like WEC rallycross (which has died over the winter and probably still costs as much) MotoGP, so they don;t make as much as they could out of those.

Personally I would not miss a GP here, it would be sad, but it is quite expensive for what you get and I personally feel that the venue could use some time to get itself in order away from the pressure of running an F1 race and the costs, issues and contract involved.

Yeah if we can lose Germany with Vettel and then Mercedes dominating, we can lose UK, for sure. Considering that 95% of the audience watches on a screen, it doesn't actually matter much at all where the races are physically held, other than the revenue opportunity and promotion. For Liberty who are here to make money not for the love of motorsport, I can't beleive they have any other criteria. 

F1 lost France while Renault was champion only 2-3 years before that and still was competing. Shortly after that, they left F1 with a team and only brought engines.

Sadly the track would probably fold if they lost the GP, I doubt anything else there generates the necessary income to cater for the developments and things going on.

 

The other big meetings they still have to pay rights for like WEC rallycross (which has died over the winter and probably still costs as much) MotoGP, so they don;t make as much as they could out of those.

 

Personally I would not miss a GP here, it would be sad, but it is quite expensive for what you get and I personally feel that the venue could use some time to get itself in order away from the pressure of running an F1 race and the costs, issues and contract involved.

I tend to believe a track saves money by not having F1...

I guess when Bernie says "I don't want to lie on my deathbed" it means that we will not hear any last words from him?

He is still uploading to his new clone. 

Sadly the track would probably fold if they lost the GP, I doubt anything else there generates the necessary income to cater for the developments and things going on.

The other big meetings they still have to pay rights for like WEC rallycross (which has died over the winter and probably still costs as much) MotoGP, so they don;t make as much as they could out of those.

Personally I would not miss a GP here, it would be sad, but it is quite expensive for what you get and I personally feel that the venue could use some time to get itself in order away from the pressure of running an F1 race and the costs, issues and contract involved.

Surely the only reason this is the case is the escalator deal they signed?  And I would not necessarily believe the hype, unless you know the figures for sure. 

My point which was poorly made, was that if a new deal can be arranged I would hope Silverstone can be able to make money from F1 races.

I am well aware they lose now.

"There are issues we have got to wrestle around and we do have others that are being aggressive about wanting to be a part of the calendar and we don't have that many slots"

So... Which of the classic races are they gonna turf out in favour of bigger money deals with new tracks?

If these 15 promotoers all tell Liberty to take a hike, they will have LOTS of slots to try hopelessly to fill.  Liberty are over a barrel and they ought to realise that.

If these 15 promotoers all tell Liberty to take a hike, they will have LOTS of slots to try hopelessly to fill.  Liberty are over a barrel and they ought to realise that.

They still have deals and one of them just extended.  They can't walk away from a current deal without legal action.  So if those circuits do just give up, who is going to fund this new series?  People keep replying the likes of "it's just money" but it has to come from somewhere.  Any new series couldn't use the any of the trademarked FIA terms.  They're positioning to get a better deal.  That's all.  If they do lose tracks nothing stops Liberty from renting tracks or co promoting street races.  Either way that's still a lot of money coming in and it's still the Formula One World Championship.   

Edited by loki, 06 February 2019 - 21:02.

They still have deals and one of them just extended.  They can't walk away from a current deal without legal action.  So if those circuits do just give up, who is going to fund this new series?  People keep replying the likes of "it's just money" but it has to come from somewhere.  Any new series couldn't use the any of the trademarked FIA terms.  They're positioning to get a better deal.  That's all.  If they do lose tracks nothing stops Liberty from renting tracks or co promoting street races.  Either way that's still a lot of money coming in and it's still the Formula One World Championship.   

Who's talking about a new series? 

I am saying that Liberty could find themselves with only half a dozen venues and a couple of half-cocked applicants.   How are they going to fill these gaps?   Any new applicant is going to see that they could get a deal for peanuts.  So Liberty fill the calendar with races in Laos, Phillipines, Ghana, Cuba or whatever, but have an income of less than half of today.  How is that going to work?  All their big TV markets lose interest because the series isn't in their  bailiwick, and the TV deals fold too.  These are all the coffin nails of F1.

The promoters need to stay strong and not get divided like the teams did. There can't be that many grade 1 circuits in the world so if 15 out of 21 are not happy either they will be running a vastly reduced calendar in a few years or they need to build or upgrade a lot of circuits to fill the calendar.

The promoters need to stay strong and not get divided like the teams did. There can't be that many grade 1 circuits in the world so if 15 out of 21 are not happy either they will be running a vastly reduced calendar in a few years or they need to build or upgrade a lot of circuits to fill the calendar.

Good luck with that. 

Another issue of these new tracks is when older tracks aren't used year on year, they fall into disrepair quite quickly. That costs more money.

https://johnwallstre...ownership-sale/

Second part of the article describes how some high-level motorsport execs are looking at forming a company to possibly acquire several @F1-hosting venues, per @HowieLongShort.

- Given the description, this group of execs may easily include some well-known names from the F1 and NASCAR worlds.

Jp

Seems a lot of risk for a primarily benevolent return.