104 replies to this topic

[AustinF1]

Oof. Looks like maybe more trouble for COTA.

 

Is America's only Formula One track in trouble?

 

http://www.motorspor...ack-in-trouble/

 

How Circuit of the Americas may be facing an uncertain future.

After three Formula One races at the Circuit of the Americas, a 3.4-mile purpose-built road course in Austin, Texas, you might suspect COTA is riding high. You might be wrong.

The Austin Business Journal named COTA one of the stories to watch in 2015 in an end-of-2014 story: “COTA puts on big shows but struggles financially: Despite an estimated $897 million in economic impact, the Circuit of The Americas race track is still a long way from profitability. Attendance dropped again for 2014’s United States Grand Prix, and rumors of an effort by investors to sell the facility persist.”

That’s just the headline. COTA’s economic concerns may lie much deeper than that. Let’s look at how COTA got where it is – the good and the bad.

In the beginning…

 

 

[Chubby_Deuce]

How much public money has the circuit and FOM received?

[Petroltorque]

Another illustration of the precarious nature of circuits. Privately funded circuits won't be able to withstand FOM's escalator and politicians don't want to be left funding contracts with public money. Valencia, Mokpo. The list goes on.

[Mohican]

Korea, India, Turkey, France...even talk of Monza being dropped.

Would like to hear the argument for the FOM escalator in a non-inflation world.
FIA and CVC are fools and should be ashamed of themselves.

[mistareno]

Soon it will be known as the Formula 1 Unknown Third World Championship.

 

I'm all for GP in developing contries, but not at the expense of traditonal events that contribute to the history and hence, the prestige of the series.

 

The bubble will burst one day and the only people who care will be the fans. The controlling interests of the 'sport' have long made their money and seem far more interested in squeezing every last ounce of profit from the sport than they are in developing any long term viability and stability in F1

[Lee Nicolle]

F1 has priced itself out of reach of most private circuits. And seemingly many Govt sponsored ones too. 

More charges from Bernie and less cars. The ideal way to run a sport. NOT.

Make the cars far cheaper to compete. Sack Bernie as it appears he has lost the plot.Just a greedy corrupt old man and then just maybe the sport may prosper in its largest unclaimed market. The USA.

[ardbeg]

 

 

I'm all for GP in developing contries, but not at the expense of traditonal events that contribute to the history and hence, the prestige of the series.

If F1 is not sustainable in developed countries, how can it be in developing countries? The money is taken from the citizens and the only difference is that in developed countries there is only so much you can steal from the citizens before someone is pulling the plug.

[Lotus53B]

What's the year calendar like at COTA?

 

Silverstone hosts at least 10 weekend meetings a year from a cursory look at its website, plus it does driving experiences, track days and hires it self out for testing and other such uses.  A similar glance at the COTA site shows 3 racing events in a year, and I can't find any information about anything else.

 

The other problem is that it is new, and will in all probability be paying off the private loans for the construction, something which the antique circuits won't have to worry about (even if Bernie does try and bleed Silverstone dry by saying it's third world every year - I still think he hopes to bankrupt it and buy it for himself), nor will the circuits funded by the various governments who want to attract global interest.

 

The financial model for F1 is not good for many of the teams and most of the circuits - in fact the only entity it does seem to be good for is BCE.
 

[OO7]

Well you've got to follow the money, so if COTA can't afford to host a Formula 1 GP, I'm sure someone somewhere will.

[AustinF1]

How much public money has the circuit and FOM received?

The track has received almost $100M in 2 years. The FOM sanctioning fee is rumored to be between $25-30M per year.

Edited by AustinF1, 07 January 2015 - 12:28.

[StudMuffin]

Bernie has always been desperate to get a foothold in the USA and tap into it's riches, but at his age now, he's only worried about the short term gain. Not actually sure why, as I doubt he could spend what he's got, but obviously greed does strange things!

Eventually he'll run out of customers, at the end of the day every business needs to make a profit, this tends to go against Ecclestone beliefs though.

[ensign14]

Bernie's always been about the short-term.  He just gets kicks from doing the deal.  He's managed to improvise his way to billions without any long-term plan.

 

Sometimes it backfires.  Brabham should have dominated the sport in the mid-70s.  They had the best designer and two very decent drivers.  But Bernie cheesepared the staff to a skeleton - and then replaced the Cosworth engine with an anchor because the anchor paid rather than wanted paying.  And Brabham never won a constructors' under Bernie.  When they had the best car by miles in 1981, the second driver was hopeless.  But again he paid rather than wanted paying.

[AustinF1]

What's the year calendar like at COTA?

 

Silverstone hosts at least 10 weekend meetings a year from a cursory look at its website, plus it does driving experiences, track days and hires it self out for testing and other such uses.  A similar glance at the COTA site shows 3 racing events in a year, and I can't find any information about anything else.

 

The other problem is that it is new, and will in all probability be paying off the private loans for the construction, something which the antique circuits won't have to worry about (even if Bernie does try and bleed Silverstone dry by saying it's third world every year - I still think he hopes to bankrupt it and buy it for himself), nor will the circuits funded by the various governments who want to attract global interest.

 

The financial model for F1 is not good for many of the teams and most of the circuits - in fact the only entity it does seem to be good for is BCE.
 

This year they have a stand-alone PWC weekend, MotoGP, WEC/Tudor, and F1 ... in that order.

[SanDiegoGo]

Bernie has always been desperate to get a foothold in the USA and tap into it's riches, but at his age now, he's only worried about the short term gain. Not actually sure why, as I doubt he could spend what he's got, but obviously greed does strange things!

Eventually he'll run out of customers, at the end of the day every business needs to make a profit, this tends to go against Ecclestone beliefs though.

 

 

bernie is making massive profits for himself and the owners, CVC(over 8 billion dollars in a decade.) i'm not sure why you think he isn't. if bernie really wanted F1 to be a success in the US it would be already, so it follows he really can't be that bothered.

[OO7]

Bernie has always been desperate to get a foothold in the USA and tap into it's riches, but at his age now, he's only worried about the short term gain. Not actually sure why, as I doubt he could spend what he's got, but obviously greed does strange things!

Eventually he'll run out of customers, at the end of the day every business needs to make a profit, this tends to go against Ecclestone beliefs though.

He is not a charity.

[StudMuffin]

He is not a charity.

True but at the end of the day you cannot keep selling to someone who is always losing money, as eventually you will get caught.

 

Also, say If Spa and monza were to walk away as it's too expensive to get replaced with tracks like valencia and shanghai. That really wouldn't bring fans to the sport.

[Clatter]

This year they have a stand-alone PWC weekend, MotoGP, WEC/Tudor, and F1 ... in that order.

Why are they having problems (or are they not trying) getting more racing there? 

[Slackbladder]

Keep getting that blood from the stone Bernie...

[Ross Stonefeld]

If the sanction fees are covered by the State funding, how can they not pay down the construction and other costs on the back of the attendance? They get a good F1 crowd with some very expensive tickets.

[Lotus53B]

Why are they having problems (or are they not trying) getting more racing there? 

Probably because in the USofA there is no shortage of other circuits, and possibly cheaper circuits that are as good to race on

Edited by Lotus53B, 07 January 2015 - 13:17.

[SanDiegoGo]

If the sanction fees are covered by the State funding, how can they not pay down the construction and other costs on the back of the attendance? They get a good F1 crowd with some very expensive tickets.

 

 

well, the article suggest not as good as they claim.

[OO7]

True but at the end of the day you cannot keep selling to someone who is always losing money, as eventually you will get caught.

Eventually our Sun will turn into a white dwarf (as well) and begin to fade, but for now the future is bright, the cow has plenty of milk in her udders.  The number of races per season has increased from 17 races in 2009, to 20 in 2015.  When the demand drops, so will the price and assuming F1 hasn't shot itself in the foot promotions wise by that time, there'll be a clamor of investors and circuits and countries fighting to host a Grand Prix.

 

Also, say If Spa and monza were to walk away as it's too expensive to get replaced with tracks like valencia and shanghai. That really wouldn't bring fans to the sport.

Looking at the big picture (including casual viewers), I don't think it will make a huge difference, however if Bernie believes the departure of such historical circuits such would be detrimental to business, he'd offer special deals I'm sure.

[HaydenFan]

Why are they having problems (or are they not trying) getting more racing there? 

 

What else to fill in? AMA Superbikes as a mid-summer standalone maybe? WEC and USC team up for a weekend because neither would attract the crowd they get if it was two completely different weekends. 

 

They do have X-Games. That's huge that it ended up there. Second biggest attended event they probably have all year. What about their concert venue? Looking at the upcoming events list for that, they have Journey and Nickelback. No! Not top selling acts. Those are second/third tier acts. Or hell, go the route of the Nurburgring, and host something that'd rival the Grand Prix in attendance. 

 

Could always call up ISC or SMI and get them to purchase the track. Sold for pennies on the dollars, but would give financial security. They already own all the other major circuits for the most part in the United States. That'd at least guarantee a top 3 tier NASCAR date. Well not Sprint Cup, but you'd get 20K+ butts in the seat for a Xfinity or Truck series race. 

 

In all reality, there is not problem with the track. Show me something this huge, with this much investment and pomp behind it in the U.S. that actually is turning a profit in it's first half decade? It's that in this day and age, investors (people in general) are impatient and if they don't get a ROI within a year or two, they back out and sue, and whine like babies. It's not like most real estate. You're not building condos and townhouses for the cheap and selling them for top dollar. You built a race track. One that is towards the top in the country, if not the world. You are staging sporting events which realistically are just around hockey and soccer in terms of importance to the general public in this country. It's just people getting nervous because they haven't made money. Doesn't mean it's a sinking ship. Not even in rough waters. 

[AustinF1]

What else to fill in? AMA Superbikes as a mid-summer standalone maybe? WEC and USC team up for a weekend because neither would attract the crowd they get if it was two completely different weekends. 

 

They do have X-Games. That's huge that it ended up there. Second biggest attended event they probably have all year. What about their concert venue? Looking at the upcoming events list for that, they have Journey and Nickelback. No! Not top selling acts. Those are second/third tier acts. Or hell, go the route of the Nurburgring, and host something that'd rival the Grand Prix in attendance. 

 

Could always call up ISC or SMI and get them to purchase the track. Sold for pennies on the dollars, but would give financial security. They already own all the other major circuits for the most part in the United States. That'd at least guarantee a top 3 tier NASCAR date. Well not Sprint Cup, but you'd get 20K+ butts in the seat for a Xfinity or Truck series race. 

 

In all reality, there is not problem with the track. Show me something this huge, with this much investment and pomp behind it in the U.S. that actually is turning a profit in it's first half decade? It's that in this day and age, investors (people in general) are impatient and if they don't get a ROI within a year or two, they back out and sue, and whine like babies. It's not like most real estate. You're not building condos and townhouses for the cheap and selling them for top dollar. You built a race track. One that is towards the top in the country, if not the world. You are staging sporting events which realistically are just around hockey and soccer in terms of importance to the general public in this country. It's just people getting nervous because they haven't made money. Doesn't mean it's a sinking ship. Not even in rough waters. 

Well, for starters they could still have V8SC had they not run them off. They seem bent on ridding themselves of WEC as well (WEC brass had at one point said they would not return to COTA under the same management), and they've alienated the SCCA to the point they've said there will be no SCCA runoffs at COTA for several years, if ever.

 

And there is a problem with the track. The business model doesn't work because they spent almost double the $225M Hellmund told them they could spend and still be profitable.

Edited by AustinF1, 07 January 2015 - 15:24.

[charly0418]

I think the problem here is that the track doesn't generate much profit outside of the F1 race. How many ppl went to the Moto GP race last year?

[Petroltorque]

No the problem is the absolute eye gouging amount of money they have to pay in race sanctioning fees to Ecclestone. Which means there is nothing left on the table for the promoter. If local government is footing the bill it will be hard to sell that to the electorate when their term is up.

[AustinF1]

I think the problem here is that the track doesn't generate much profit outside of the F1 race. How many ppl went to the Moto GP race last year?

Charly, you've hit the nail on the head. I believe the F1 race was supposed to make some profit, but not a huge one. MotoGP sanctioning fees, however, are much cheaper, leaving much more room for profit. COTA (rather dubiously, imho) claimed MotoGP drew about 130K over the course of the weekend in 2013. COTA announced a lower number in 2014, at about 119K. This is the race that should be their most profitable.

[ensign14]

Maybe another problem is that the more F1 has a presence in the US, the more likely it is someone at the Feds will investigate money laundering.  They seem to be less bothered by financial crime in Azerbaijan.

[chunder27]

Same old thing again, like ticket prices, 30 quid to watch testing

 

there is an answer but real fans wont like it.

 

Don't pay the high admission prices, the circuits will not be able to run the events and fold.  They are only trying to get races for PR for that region, be it Abu Dhabi, Korea, China, Bahrain. They do not really WANT F1, what they WANT is Bernie and his business contacts to be intruduced, go on jollies with etc.

 

COTA was and never will make money like Portimao, Istanbul, Korea, Lauzitzring, Rockingham as they were built without a proper development business plan. They were built wirh grants fo money that would go elsewhere unless a highly trained marketing cretins manage to convince the locals, councillors nad government that it will create tourism, jobs and local wealth,.

 

They never do and most of tme are now white elephants, as COTA, Korea, Bahrain, Valencia, the totally ruined Fuji, and many others are,.

 

Do a Zandvoort, Zolder, Brands, Donington, Magny Cours, forget about F1 and concentrate on your core fans. 

[Clatter]

No the problem is the absolute eye gouging amount of money they have to pay in race sanctioning fees to Ecclestone. Which means there is nothing left on the table for the promoter. If local government is footing the bill it will be hard to sell that to the electorate when their term is up.

If local government is footing the sanction fee then there must be much bigger problems if there's still not enough left for the promoters.

[HaydenFan]

If local government is footing the sanction fee then there must be much bigger problems if there's still not enough left for the promoters.

 

Yes! Someone is most definitely going home a very wealthy person out of all of this. And his name isn't Bernie Eccelstone. 

[Clatter]

Well I'm sure he is, but he can't be the only one.

[Henri Greuter]

Bernie's always been about the short-term.  He just gets kicks from doing the deal.  He's managed to improvise his way to billions without any long-term plan.

 

Sometimes it backfires.  Brabham should have dominated the sport in the mid-70s.  They had the best designer and two very decent drivers.  But Bernie cheesepared the staff to a skeleton - and then replaced the Cosworth engine with an anchor because the anchor paid rather than wanted paying.  And Brabham never won a constructors' under Bernie.  When they had the best car by miles in 1981, the second driver was hopeless.  But again he paid rather than wanted paying.

 

 

Was the fact that during the years when a certain brazilian driver was on Bernie's paylist of no influence? That certain brazilian did not care about the team he drove for at all other than for self interest and he wanted drivers of little to no danger to him so the team would be focussed on him and him alone.

 

Henri

[Prost1997T]

Don't forget that COTA ended up costing over $400 million to build. That's going to be difficult to recoup regardless of what money-earning events you have.

[maverick69]

Would be a shame if it goes. It's a cool track. Up there with the best.

So where are we at in the last few years? Valencia? Turkey? India? Korea? Etc.... Etc.....

Bernie and chums are clearly taking the CVC.....

[HaydenFan]

Would be a shame if it goes. It's a cool track. Up there with the best.

So where are we at in the last few years? Valencia? Turkey? India? Korea? Etc.... Etc.....

Bernie and chums are clearly taking the CVC.....

 

I don't blame a high sanctioning fee and Bernie for all of this. It's Formula One! The fans, media, manufacturers, teams, sponsors want the glitz and glamour once really only seen at Monaco, everywhere. That led over of the past 2 decades to have circuits that racing wise, are sub par, but due to other facilities aspects, and the funds behind them, they got a Grand Prix race. And to get that glitz and glamour, it cost way much more than anyone expected. 

[Kristian]

I don't blame a high sanctioning fee and Bernie for all of this. It's Formula One! The fans, media, manufacturers, teams, sponsors want the glitz and glamour once really only seen at Monaco, everywhere. That led over of the past 2 decades to have circuits that racing wise, are sub par, but due to other facilities aspects, and the funds behind them, they got a Grand Prix race. And to get that glitz and glamour, it cost way much more than anyone expected. 

 

Exactly. If you want to run a good F1 event, look at Austria - its not glamourous - its a load of fields full of beer-drinking Germanic people, having a rollicking good time and enjoying pretty decent ticket prices with a ton of entertainment. The circuit is short, no fancy corners, but still a challenge and offers good racing. And I don't think it cost a bomb to set up. 

 

You don't need tracks in glitzy cities, with regulation average speeds and corner radii, with the ability to moor yachts, and dull concrete walls to separate the cars from a hotel that changes colour. Fans don't pay money for that. 

[AustinF1]

Don't forget that COTA ended up costing over $400 million to build. That's going to be difficult to recoup regardless of what money-earning events you have.

Exactly, as I mentioned above. Hellmund told the investors that the business model only worked if they spent about $225M on construction. Then they cut Helmund out, which voided the FOM deal he had with Bernie and caused a lengthy construction delay on a project that was already in a massive time crunch. Later after that was resolved, there was another delay as the investors apparently ran out of money for a bit. Digging out of that hole (npi) cost a lot of extra money, and then Epstein added things like the tower ($15M+ iirc)  and the amphitheater.

Edited by AustinF1, 07 January 2015 - 23:08.

[AustinF1]

I don't blame a high sanctioning fee and Bernie for all of this. It's Formula One! The fans, media, manufacturers, teams, sponsors want the glitz and glamour once really only seen at Monaco, everywhere. That led over of the past 2 decades to have circuits that racing wise, are sub par, but due to other facilities aspects, and the funds behind them, they got a Grand Prix race. And to get that glitz and glamour, it cost way much more than anyone expected. 

Also, it doesn't make sense when people say COTA might be failing because of the high sanctioning fee ...  because effectively that fee (and then some) is being paid in full by Texas taxpayers.

[HaydenFan]

^^^^^^^^

Also, with what is really the biggest cost already taken care of, it essentially gives the circuit and promoters a license to print money. Somewhere, that money is disappearing. Questions are who and where? 

[ehagar]

Other than a few events and the occasional testing, how do they fill the rest of the year?

If that circuit isn't being used every single free day testing/track days/local racing then they are nuts.

The rental rates look... very high. I suppose even if they could get the track out at 55,000 a day for most of the year its chump change to the sunken debt they put to making the place.

Edited by ehagar, 08 January 2015 - 03:19.

[AustinF1]

Other than a few events and the occasional testing, how do they fill the rest of the year?

If that circuit isn't being used every single free day testing/track days/local racing then they are nuts.

The rental rates look... very high. I suppose even if they could get the track out at 55,000 a day for most of the year its chump change to the sunken debt they put to making the place.

It's pretty quiet out there most of the time. Is $60K/Day high?

[loki]

The long term value of the facility is the concert venue, not the race track.  The investors can sell it, write down the loss and someone like Live Nation can buy it and use it primarily as a concert venue and the track would be secondary or even bulldozed (though I doubt they'll tear it up).  The concert venue is a far better investment in and of itself than the track.  It's zoned for it, it's built.  You're only talking 10-20k an event so the impact on traffic will be much lighter.

 

The daily track rental rate is far too high for national and regional club sports car racing.  A $60k/day rate is 3 to 6 times what the going rate is for other tracks, even ones with more pedigree like Road America or Laguna Seca.  According to some that have worked with them for club racing they aren't easy to work with and don't have a customer centered focus.

 

Given the way McCombs and Epstein operate this could be a ploy by them to extract some sort of concession from either the local, state govs or even FOM.  Likely all three.  I'd reckon they want the property taxes reindexed, keep getting the event trust money and have FOM reduce the sanctioning fee. New Jersey isn't going to happen, Long Beach declined to even entertain an offer and Vegas was never on the radar of anyone local that had to be convinced to hold the race. That leaves no USGP.   Anyone that can afford it doesn't want it and those that want it can't afford it, even if there were somewhere for them to run. 

[loki]

^^^^^^^^

Also, with what is really the biggest cost already taken care of, it essentially gives the circuit and promoters a license to print money. Somewhere, that money is disappearing. Questions are who and where? 

The long term debt service on the $400 mil is a bigger cost than the sanctioning fee.

[loki]

Exactly. If you want to run a good F1 event, look at Austria - its not glamourous - its a load of fields full of beer-drinking Germanic people, having a rollicking good time and enjoying pretty decent ticket prices with a ton of entertainment. The circuit is short, no fancy corners, but still a challenge and offers good racing. And I don't think it cost a bomb to set up. 

 

You don't need tracks in glitzy cities, with regulation average speeds and corner radii, with the ability to moor yachts, and dull concrete walls to separate the cars from a hotel that changes colour. Fans don't pay money for that. 

The only reason Austria is still around is because of Red Bull and their willingness to fund it.  Without that it would have been bulldozed long ago.

[Kristian]

The only reason Austria is still around is because of Red Bull and their willingness to fund it.  Without that it would have been bulldozed long ago.

 

Yes, but that wasn't my point - it doesn't have all the fancy stuff the modern circuits need and isn't exactly in a glitzy city centre location, yet its one of the very few sellouts on the calendar as it appeals to core fans. On top of that, it had good racing and driver challenge on what is a very simple circuit design. 

[AustinF1]

Yes, but that wasn't my point - it doesn't have all the fancy stuff the modern circuits need and isn't exactly in a glitzy city centre location, yet its one of the very few sellouts on the calendar as it appeals to core fans. On top of that, it had good racing and driver challenge on what is a very simple circuit design. 

Something Melbourne's promoter does particularly well, imho, is to put on a great show for 4 days that's a big 'bang for the buck'. 5 F1 sessions, 4 V8SC races + associated sessions, Porsche & Ferrari cup races & sessions, Historics, air shows, and much more. COTA is kind of on the other end of the spectrum, offering Porsche Cup and some vintage cars (not Historic GP, except in 2012, but rather a group of mostly lower formula open-wheel cars from some of the SVRA guys).

Edited by AustinF1, 09 January 2015 - 13:50.

[chunder27]

Agreed Austin F1

 

Silverstone could leanr an awful lot form Melbourne

 

You get very little value for money in pure racing terms from an F1 weekend at Silverstone, just GP2/3 and maybe some historic nonsense, nothing else really.

 

I know there isnt much pit space, but in terms of pure racing you get better value just about at any other race meeting during the year other than endurance racing, which lets face it you have to be bonkers to pay and watch anyway! lol

[rhukkas]

isn't the Melbourne GP subsidised by the Aussie tax payer? So you can't compare to Silverstone at all really when the financial conditions are so different.

[AustinF1]

isn't the Melbourne GP subsidised by the Aussie tax payer? So you can't compare to Silverstone at all really when the financial conditions are so different.

COTA is massively subsidized, too. But it doesn't show in the lineup.