12/01/2012
NEWS STORY
It was not so long ago that Germany had two Formula One races but the economic downturn put paid to that. Now Spain is feeling the pinch too with talk that not only could Valencia lose its government support and drop off the F1 calendar but Barcelona may follow suit.
Both Germany and Spain have historically been two of F1's strongest markets thanks largely to the tremendous popularity of world champions Michael Schumacher and Fernando Alonso. Current champ Sebastian Vettel is of course German but not even his fan club can help sustain two races in his home country. Which brings us to America.
The majority of the population of the United States doesn't even know what Formula One is and many of those who do have a bitter taste about it. There is good reason for this because a little more than six years ago a race took place at Indianapolis in which only three teams took part. It led to fans throwing bottles on to the track and (unsuccessfully) suing the organisers. It's hard to believe but F1's reputation in the United States went downhill from there.
A dispute over the fee saw the US Grand Prix cancelled after the 2007 race and it hasn't run in the country since then. US race fans didn't miss it as their home-grown NASCAR series is wildly more popular than F1 was when the US GP ran at Indy. Adding insult to injury, a planned US-based F1 team failed to get going and has left F1 with two empty grid slots since 2010.
It is against this unlikely backdrop that two race promoters in the US decided to bid for slots on the F1 calendar. Austin was the first to succeed and in November this year the US GP is scheduled to take place on its immaculately designed Circuit of the Americas. This came as a bit of a surprise since Austin had no F1 heritage. However, the bigger surprise was still to come when in October last year a race beside the Hudson River in New Jersey was granted a slot starting in 2013. At the launch event the race's lead organiser, businessman and sometime racer, Leo Hindery, claimed that the three-day event will attract 100,000 people, and generate around $100m a year in economic activity.
It seems hard to believe that America will be able to support two races when the countries in F1's heartland are struggling to support one. Data from F1's industry monitor Formula Money shows that race ticket prices average at £294 ($449.50) so you might think that this alone could be a concern for cash-strapped Americans.
However, as ever, F1 follows the money and, if a big enough cheque was handed over then it wouldn't be impossible to imagine a GP taking place in Iraq. There have been well-documented disputes between the organisers of the race in Austin but from the very start they have been upfront about the sources of their funding. Texan billionaire Red McCombs and private equity boss Bobby Epstein committed to providing money with the former giving an interview to Pitpass' business editor Christian Sylt to promote his involvement.
Since then, it is understood that the Austin race organisers have been in touch with additional backers. Investment firm Anchorage Capital was recently considering putting money in but backed out according to one of its officers Neel Gehani. Regardless of who provides additional funds, one thing that is clear is Austin has got money.
Shouting about having backers makes perfect sense and is completely normal behaviour for an F1 race or team. The logic behind it is simple.
F1's history is littered with races which failed to get off the grid ranging from flights of fancy such as Cancun and Cape Town to Moscow (which had a press conference to announce its race) and of course Donington which was only scrapped a few months before the British GP was due to take place. Investors and sponsors around the world are well aware that F1 is a risky business so the last thing they want to do is commit funds to a race if it looks like there is a chance of it failing. The best way to prove that a race is a safe investment is to publicly reveal the backing.
We aren't saying that New Jersey lacks backers but we are saying that, in F1 terms, it is unusual that it has not revealed their identities. Most people involved with F1 aren't shy of showing off their funding for the good reason explained above. At a time of economic decline being upfront about funding is the only way to be really sure that two races can take place in a country with such a poor track record as F1 has in America. It is hard to forget the words of Donington's former boss Simon Gillett who said that his race "will bring significant investment and regional development" yet just over a year later it was scrapped for failing to pay F1 boss Bernie Ecclestone the hosting fee.
A senior source in the US motorsport industry told Sylt in October on condition of anonymity that "Hindery has already appointed a marketing firm to find sponsors for the event. To do this within hours of the launch suggests that either the promoter is highly organized or finding other people's money to stage the race is important or (most likely) both."
Sylt is also aware that the New Jersey project is in the process of appointing a president and PR executive. Ironically, one thing it doesn't seem short of is senior executives. There's Hindery and his private equity company Intermedia. Former NASCAR race promoter Humpy Wheeler and his son Trip are also involved. Sylt also understands that businessman Les Delano is involved. Longtime Pitpass readers may remember his name from when he was chief executive of marketing firm Octagon whose contract to run the British GP was prematurely terminated in 2004.
Aside from funding, what any F1 race really needs is awareness and this is also where one worries about New Jersey. On Tuesday evening Sylt met a senior F1 executive at a popular bar called Houlihan's on Harbor Boulevard in New Jersey which is around a mile from the proposed track. They decided to ask the bar waiter whether he knew that the world's most watched annual sport would be hosting a race a few minutes walk away and he had no idea. This is the real challenge for New Jersey.
The New Jersey area is not short of sports events and it certainly doesn't require F1 for promotion so the job of educating the busy local population about the race really should have begun the moment the contract was signed. True, the race was only announced a few months ago but it took far less time than that for pretty much every person in London to know that the city had won the right to host the Olympics.
In contrast to New Jersey, you can't fault Austin for its awareness. The main local paper, the Statesman, has written over 50 front page articles about the race since it was announced which is comparable to the coverage given to the 2012 Olympics by London's main newspaper the Evening Standard. Sylt also understands that a major UK-based F1 publication even went to the trouble of testing the renown of the Austin race by asking a filling station attendant close to the city limits if he had heard that a GP would be taking place. Unlike the New Jersey waiter, he knew all about it.
Indeed, the media coverage of the millions of dollars of private and public money allocated to Austin has encouraged others to try their hand at F1 race promotion.
Pitpass understands that Formula Money has been contacted by numerous groups from the east to the west coast of America who are planning races in major cities. What they are after is a new Formula Money report on F1 in the US containing data officially sourced directly from gate receipts at Indianapolis. It shows not just the total attendance for the last four years of the US GP but also the precise breakdown of how many spectators came from each US state and international country.
Obviously a GP in Austin or New Jersey could only hope for at most as many spectators as attended Indianapolis in its most popular year so the data is invaluable to promoters of F1 races in the US. It is the first and only officially-sourced indication as to how many people are likely to attend the races in Austin and New Jersey and the results are believed to be stunning.
The last thing the US race organisers want is for sponsors, state authorities or investors to buy the data, or read it in the media, before they have committed funding in case it differs widely from their own projections. Given that the economic impact of a race depends on the number of spectators this makes a lot of sense. Accordingly it's no wonder that the race organisers are after it now to see if they need to adjust their projections. Pitpass readers can rest assured that they will read the headline figures here first.