10/09/2011
NEWS STORY
There is no doubt that Formula One's rightsholder, the F1 Group, has the sale of the sport's rights, whether to television stations, trackside advertisers or circuits, down to a fine art. However, the same can't be said of its luck in recent years with promoting F1 races.
In 2007 the F1 Group bought Istanbul Park Organizasyon AS, the promoter of the Turkish Grand Prix, but five years on, the race has been dropped from the 2012 calendar due to poor attendance. Despite weak spectator numbers, the race attracted a generous £23.2m of government support which went straight into the F1 Group's coffers every year. Together with the £3.3m believed to have come from ticket sales each year it gave the F1 Group a nice profit after deduction of the race hosting costs.
The F1 Group just gets a race hosting fee (usually roughly equivalent to the amount of government support) from the promoter of pretty much every GP except Turkey. So in these cases it is the promoter, not the F1 Group, which gets the opportunity to profit from the running of the race itself.
Admittedly the F1 Group's profit on the Turkish GP was not high enough to prevent the race from being scrapped but it is nonetheless money which it will otherwise lack so the idea of another promoter taking Turkey's place in its portfolio shouldn't come as too much of a surprise.
Regular readers will remember that F1 Group chief executive Bernie Ecclestone recently said that he has no plan to buy any circuits outright which rules out an acquisition of Silverstone as some reports have wrongly suggested. However, buying race promoters is a different story and it is nothing new for Ecclestone. It is now an opportunity for the F1 Group to replace the lost profit from the Turkish GP and then some.
The ideal promoter is one with potential for high ticket sales but no immediate track record of this. The reason it is not ideal for the race in question to come with guaranteed blockbuster ticket sales is that the promoter (including the F1 Group) needs to lease the circuit from the owner to host the GP. If the race had blockbuster attendance last year then the cost of leasing it this year would be much more than if there was little recent track record of high ticket sales. The higher the cost of the lease, the lower the chance of the promoter making a profit. This is precisely why the F1 Group bought the Turkish GP promoter.
The race joined F1's calendar in 2005 and Ecclestone saw huge potential in the untapped eastern European market. However, this didn't materialise. As Ecclestone told Pitpass business editor Chris Sylt; "we bought the promoter in Turkey because, as is the case with lots of things, it seemed like a good idea at the time. If, as expected, there had been 100,000 race spectators it would have been good but it didn't work out that way."
The potential to drive spectator interest in an F1 race doesn't just come from having an untapped local market. If a local driver surges to success in the sport spectator interest in his home race can soar. This is precisely what happened in Spain following Fernando Alonso's first race win in 2003. Although the F1 Group did not take a stake in one of the Spanish race promoters, the same principles apply to the TV rights. These were acquired by Ecclestone's close friend Flavio Briatore for a pittance before Alonso became world champion. Briatore sold the rights to Spanish TV stations and made a massive £22m from them.
So which promoter could Turkey be replaced with in the F1 Group's portfolio? We are talking about a race with government assistance, high potential ticket sales and little to no recent track record of attendance. Pitpass hears that the most likely candidate is Full Throttle Productions, promoter of next year's United States GP in Austin. Full Throttle holds the rights to host the US GP which is due to be held at Austin's Circuit of the Americas for 10 years from 2012. It is in pole position to come under the wing of the F1 Group for many reasons.
Firstly, Full Throttle's founder Tavo Hellmund probably has a closer relationship with Ecclestone than any other race promoter. As Ecclestone has said, he knew Hellmund "before he was born" and this comes from his father, Gustavo Hellmund-Rosas, being president of Mexico's GP organising committee when the race was held in the late 1980s. Tavo also worked for Ecclestone's Brabham team in the 1980s and has stayed in close contact with the F1 boss since then.
The US is probably the most strategically important market which F1 has not already penetrated. The teams and sponsors all want to make the most of it, particularly after F1's most recent foray into America led to the debacle of only three teams participating in the 2005 US GP due to defective Michelin tyres. Owning a stake in the promoter is a way for the F1 Group to show it is throwing its support behind the race and further elevate its status above other GPs which may also take place in America. Full Throttle has the rights for its race to be called the only US GP but other F1 races, with different names, are believed to be in the planning stages in New York and on the west coast.
It is worth noting that we aren't talking about the F1 group owning 100% of Full Throttle as was the case with Istanbul. Full Throttle is Hellmund's personal business which he set up from scratch. It has also promoted NASCAR and USAC Midget Car races so there is no questioning Hellmund's skill.
Ecclestone has said that few people know and understand F1 as well as Hellmund. This is reinforced by the fact that before the circuit in Texas has even been built Hellmund has already got all the pieces of the puzzle in place: government support, F1, MotoGP and V8 Supercars. It's no wonder that other countries are seeking his services about F1 consultancy and advice. That is precisely why it makes sense for the F1 Group to join him. Full Throttle may not be the only one.
India is also a sleeping giant of a market so it would make sense for the F1 Group to have some form of permanent presence there too. Likewise, given the high hopes for Robet Kubica, once he has fully recovered from his rallying accident, the F1 Group could buy into the promoter of a Polish GP if the race eventually gets off the ground. As Pitpass has previously reported (http://www.pitpass.com/43907-Concorde-clause-paves-the-way-for-25-race-F1-calendar), the F1 Group has already applied for the trademark to 'Grand Prix of Poland' so a stake in the race promoter there would be another logical step.
There is in fact precedent of F1's rightsholder owning multiple race promoters. Back in the early 1990s, Ecclestone's private company Formula One Promotions and Administration (FOPA) managed the rights to F1 and also owned outright the promoters of the Belgian, German, Canadian and US races. The FOPA subsidiary in charge of the US GPs was General Promotions Inc. and this ran several races including the 1990 round in Phoenix which was won by the late Ayrton Senna. According to its accounts, the race made £1.3m in revenue giving Ecclestone a net profit of £154,054 which was impressive in those days. Times may change but F1's interest in the US does not.